What A Week: Congress Falls Short Of Low Expectations

OK, so Congress finally, thankfully passed the Economic Stabilization Act. They approved Treasury Secretary Henry Paulson's request to purchase $700 billion in troubled mortgage-related assets in order to restore critically needed confidence in our credit markets.

But wait, there's more!

Earlier this week, I called the nay-voting members of the House "cowards." Turns out I sold them short: They're profiteers. They saw the financial hurricane coming, and decided that this was a perfect time to get a little extra for themselves. If Home Depot or Lowe's tried this during hurricane season, they'd get prosecuted. But it's cool to profiteer if you're Congress, and that's exactly what they did -- to the tune of $110 billion.

As a reminder, this is different than -- and additional to -- the $700 billion that the original act requested. There is a reasonable chance that the taxpayer will recoup all $700 billion of that money, or more. But this extra $110 billion is gone ... vaya con Dios.

Here are some choice quotes from a few representatives who voted "nay" on Monday but "yea" on Friday:

"We have to act. We have to act now."

"I have decided that the cost of doing nothing is greater than the cost of doing something."

"I may lose this race over this vote, but that's OK with me. This is the right vote for the country."

So apparently they're not cowards -- just latent heroes?

Let's look at some of the heroic items they put into the act while Rome was burning, such as tax breaks for:

  • Bicycle commuters
  • Disaster victims
  • School supplies
  • Imported rum (huh?)
  • Plug-in electric drives
  • American Samoa economic development
  • NASCAR racetracks
  • Wool fabrics
  • Wooden practice arrows

Wow. Some of these ideas may have merit -- but what are they doing here, and why were they used as ransom? The only significant relevant change is the increasing of the FDIC insurance ceiling per account, from $100,000 to $250,000, something that could easily have been done separately.

Heroes? Please.

As our representatives were holding our economy hostage, more damage was done. The stock market swung crazily. It dropped 7% on Monday alone, creating even greater confidence problems for investors and consumers. Even a great non-financial business like Apple (Nasdaq: AAPL  ) fell nearly 20% that day (granted, that some of that was partially thanks to downgrades, but still).

Meanwhile, the relatively healthy financial stocks like JPMorgan (NYSE: JPM  ) , Bank of America (NYSE: BAC  ) , and Wells Fargo (NYSE: WFC  ) continued their volatile ways. And this was before the latest round in the Wells vs. Citigroup (NYSE: C  ) battle for Wachovia (NYSE: WB  ) .

Moreover, the TED Spread reached record levels, and massive levels of economic activity failed to occur. I expected more from our representatives, because they have unique access to the facts and analysis. These damages were plainly foreseeable and avoidable. My expectations were lowered on Monday when they bowed to public opinion. Then they failed to meet my already-near-bottom expectations while proclaiming themselves heroes. Congress held our economy hostage so that they could buy time to profiteer.

Unimpressive, but what else should I have expected?

Well, now at least the real work to stabilize our credit markets and economy can now begin.

Our discussion board on this issue remains lively with opinions, so please come and share yours with us.

Motley Fool President Scott Schedler owns shares of JPMorgan Chase. Apple is a Motley Fool Stock Advisor recommendation. Bank of America and JPMorgan are Income Investor picks. Home Depot is an Inside Value recommendation. The Fool has a disclosure policy.


Read/Post Comments (9) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 03, 2008, at 5:06 PM, Ishortyou wrote:

    Now that the bail out deal was approved Wachovia needs to hurry in selling those toxic 122 billion or more in loans to the government at cost and take the tax breaks if needed to finally get rid off those toxic wastes from their banking book of business.

  • Report this Comment On October 03, 2008, at 5:33 PM, drcadillac wrote:

    Are you effin essin me?! Who in congress (or any constituent behind them) said, "This bill is a complete disaster! Now, add a tax break for those downtrodden archers, and you got yourself a deal! Either that or for importin rum. I can't get enough of the stuff!" I'm officially moving to Greenland to join the vikings and abandon the U.S. government.

  • Report this Comment On October 03, 2008, at 8:54 PM, zenbiont wrote:

    the author forgot to add tax breaks for FOREIGN OIL.

    Nice going legislators. See you at the polls.

  • Report this Comment On October 03, 2008, at 10:05 PM, frubblezuck wrote:

    This bill will only serve to hurt. All it does is allow the same corporations who created this mess to continue to do business.

    Now we have the guy in charge of the IRS in significant control of the debts of the American taxpayer. You might not see it today, but you will. It is less avoidable. This is fascism - a system of government marked by stringent social and economic controls with a strong and centralized governing body. It's now part of the law and opens the door to more laws which reach deeper into your wallets and further constricts your freedom.

    It's disgusting.

  • Report this Comment On October 04, 2008, at 1:20 AM, mlaursen wrote:

    It's horrible enough for you to gloat about the passage of this public-debt-inflating boondoggle, but to try to lay the blame for all of the pork grafted onto the bill on anybody but its proponents is ridiculous.

  • Report this Comment On October 04, 2008, at 6:16 AM, canadaeq wrote:

    It sounds like you didn't even read the bill.

    The tax breaks you are talking about were part of a separate bill that had already passed the senate 93-2.

    The tax breaks you are talking about are already in place for the most part, most of them are just being extended from being available up to 12/31/07 to 12/31/09.

    Paulson and Bush originally present a 3 page document meant to give unlimited power to Paulson with the bailout money. The sheer ineptitude of Wallstreet and this Administration gives plenty of reason for Congress to take there time before signing off on a bailout to the people who caused it that is more than $2,000 per American. I highly doubt the tax break bill that was attached to the Economic Stabilization Act had much to do with there decision at all. Especially since it would have been presented to and passed the House anyway (remember it passed the Senate unanimously weeks ago).

    Save your venom for the ones who got us into this mess who we are handing $700B over to now.

  • Report this Comment On October 04, 2008, at 8:13 AM, pberardi wrote:

    Let's see if I understand this now...

    All that money the banks and financial instituions had was clogged up in the financial pipeline unable to flow through the system.

    This legislation will unbind this money so that it flows through the system to make loans and provide liquidity.

    Sounds to me like we just paid for the biggest enema in history!

    I'm beginning to believe all those conspiracy theorists that the market is rigged. Won't I feel stupid after 30 years of disciplined investing, it turned out I was nothing but a pawn in a chess game.

  • Report this Comment On October 04, 2008, at 8:48 AM, Prophit0 wrote:

    What this article neglects to tell you is we have just witnessed first hand a RICO conspiracy to commit TREASON against the American people and this nation. I wondered why we had just shipped 26,000 National Guard overseas during this thing.

    No one got to read the bill before it passed and here is why........ check out this first link for background and then read the 2nd link for after passage for the treason that has occurred, and finally read the sections of the bill after that, what you will see is WE GOT HAD USING ECONOMIC TERRORISM ON THE AMERICAN PUBLIC. The world you lived in exists no more AND YOU HAD NO SAY IN IT. (If we have anyone left in Fed Criminal divisions with authority, then we can prosecute with a rescission of the bill, but until then, we are toast.)

    This is Treason and during time of war it is a death penalty offense. They are still vulnerable. That is if there is any law enforcement left... Oh, and by the way to add icing to the cake, yesterday the Senate passed the Law of the Sea Treaty (necessary for thier cover for what they had done) which extends its legal structured authority over the entire US land mass thus circumventing the Constitution and making it irrelevant... these guys are geniuses, too bad they are psychos as well.

    http://uk.youtube.com/watch?v=HaG9d_4zij8

    Now read this link... then the sections of the bill.

    http://investment-blog.net/us-ships-800-billion-ameros-to-ch...

    “Section 101 (a)(1) establishes what is termed the Troubled Asset Relief

    Program (TARP) to which substantial portions of what the American people

    currently owe to their banks and financial institutions is to be turned

    over the US Government for redistribution to foreign banks.

    Section 101(c)(3) Designates for the first time in American history

    these foreign banks as financial agents of Federal Government with </b>full

    law enforcement authority over the citizens in the US.

    Section 3 (b) allows the US Secretary of the Treasury to put any kind of

    debt, including credit card, home loans, personal loans, automobile

    loans, etc., into the TARP programme from any country.

    Section 112 allows the US Secretary of the Treasury to astoundingly

    extend financing to foreign banks to purchase the debt of the American

    people.

    Section 112 (1)(a) allows the US Government to hold stocks in companies

    for the first time in their history and which completely destroys the

    capitalist economy of their Nation. (Socialism in order to homogenize international political systems)

    Section 119 (2)(a) gives the US Secretary of the Treasury dictatorial

    powers not reviewable by courts making this position the most powerful

    one in America.

    Section 122 increases the US public debt to the incredible amount of

    $11,315,000,000,000 (Trillion) (Total global GDP of the world is only 60 trillion)

    Section 204 puts the United States under emergency economic rule and

    states, "all provisions of this Act are designated as an emergency

    requirement and necessary to meet emergency needs”. (necessary for martial law)

    But, these reports warn, the two most chilling measures put into this

    new law are titled “Section 511 "Paul Wellstone and Pete Domenici Mental

    Health Parity and Addiction Equity Act of 2008” and “TITLE II-SPECIAL

    PROJECTS ON FEDERAL LAND Section 201”.

    The new mental health provisions contained in these new laws allows the

    United States to label dissident citizens as being ‘mentally ill’, and

    the ‘Special Projects’ section allows for the reimbursement to US cities

    and counties for the building of concentration camps for these mentally

    ill dissidents. (now it makes sense why wellstone was killed, he would never have allowed this).

    The fear of the United States Government against their dissidents is

    becoming more evident as many of them are beginning to sound the alarm

    of events to come.

  • Report this Comment On October 12, 2008, at 4:20 PM, oldviking38 wrote:

    prophet sounds a bit shrill but I have to say that the Economic crisis has a lot of Georg Sorros modus operandi to it. The actual economic conditions at the start were a bit worrisome but not severe. The crisis seems to have begun with Chuck Schumer's letter that cast doubt on the liquidity of a big CA bank. The next day there was a run on the bank and it collapsed. Subsequent investigation showed that the Bank was actually in good shape. Was this a signal for the real attack to begin. The methods were incessant rumors of insolvency and impending doom that caused panic selling and eventual collapse of many banks and financial institutions. The motive is to create an economic holocaust from which Obama and the Democratic party can emerge like a Phoenix. I fear that they may be successful in gaining the throne but will rule over Armageddon. How can they put the demon they released back in the bottle?

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