McCain To The Rescue

My instinct yesterday afternoon was that McCain was doing a good and bold thing politically speaking. As the night wore on & I read more, I became convinced it was the right move for the country, too.

No need to rehash everything, but I like the way the Anchoress is thinking about things now (her initial reaction was negative, which makes her thought process more interesting).

As a fiscal conservative I share the GOP's instinctive balking at a bailout, but Thomas Sowell convinced me here and here (linked yesterday) that it was necessary.

Financial institutions are not being bailed out as a favor to them or their stockholders. In fact, stockholders have come out worse off after some bailouts.

The real point is to avoid a major contraction of credit that could cause major downturns in output and employment, ruining millions of people, far beyond the financial institutions involved. If it was just a question of the financial institutions themselves, they could be left to sink or swim. But it is not.

We do not need a replay of the Great Depression of the 1930s, when the failure of thousands of banks meant a drastic reduction of credit-- and therefore a drastic reduction of the demand needed to keep production going and millions of people employed.

Everyone involved --including the President in his excellent speech last night-- is having to walk a fine line between letting the public know what potentially deep trouble we're in and not causing the trouble by inciting panic. Here again the Anchoress --or one of her interlocutors, actually-- sheds some light.

[My husband] works for (bank name edited per request) bank. A very high-up in the ranks mucky muck came to his building today to discuss the Fan & Fred & AIG situation. This fellow did say that, for now, (his bank) is quite above water, shouldn’t have any problems, no collapses or lay offs

BUT…He also mentioned, when asked, not as a (bank) representative, but as a man who must analyze financial situations world wide and make critical decisions based on that information that the situation was extremely critical for the next few days and that could all change very quickly.

He said that the situation is much much more critical than is even being reported by any outlet he’s seen. The original “runaway Dems” response has many world-wide investors terrified & ready to drop ALL US investments like hot rocks.

If something isn’t done, this man believes, by Monday at the latest, he is convinced from having his ear to the wall & the nose to the ground that our whole economy will simply collapse like a house of cards in a gust of breath because the worst fears of these world wide investors - who invest in our economy to the tune of trillions (and in some ways ARE the American economy) - will rid themselves of their holdings and call loans due and we are not in a position to pay our debts right now. We are a ‘debtor nation’, tottering on a terrible brink, he said, worse than the situation in the 1920’s and he said even the extremely healthy (bank) would likely go under with the rest of our economy.

So we don't have to go under as a nation over the weekend, but we may. That's why McCain's here in Washington.

To the talk show hosts who've been urging caution and going slow the past few days: you sure you know what you're talking about? Because I agree with what Rich Lowry says here

I've talked over the last few days to everyone I know who knows this stuff—conservatives all—and have found no one who says we don't need something big.
And now comes the news this was Paulson's idea --because the Dems wouldn't move without the GOP & the GOP wouldn't move without McCain. McCain seems to be the necessary man, a responsibility he accepts. Obama looks increasingly irrelevant from where I sit.

Update: Late-breaking is this from Larry Kudlow, who was supporting the Paulson plan as of last night. Now a slight hedge.