Moving the Deck Chairs on the Legislative Titanic

I keep getting emails saying, "See, the House voted down the TARP bill, and the world didn’t end, so we must be right in saying it was unnecessary."

Three points:

  1. The markets aren’t convinced TARP is dead — the U.S. system has more legislative rabbit holes than your average farmer’s field — so at least wait for that before celebrating.
  2. The carnage, without some support or assistance (and it doesn’t have to be TARP, but nothing is going to easier), will now turn into a rolling boulder, regardless of what the Dow does in the next ten minutes. More banks will fail as overnight credit markets stay closed, small businesses will lose lending lines, consumers will retrench, etc.
  3. If you’re so convinced that the House has cleverly figured this all out, ask yourself this: Where were these same newly smart people when the credit crisis was building? While Fannie and Freddie rightly had their critics, it is an over-simplifying myth that the credit crisis is a function of Fannie/Freddie alone. The thing was far past them when it peaked in 2005/06.

Until people grow up and think past their political vendettas, we are just moving around the deck chairs on the Titanic. Hope you’re all enjoying the views.