Sanity Injection

Injecting a dose of sanity into your day’s news and current events.

Why are House Republicans opposing the bailout?

Posted by sanityinjection on September 26, 2008

It seems that House Republicans are the main group opposed to the proposed financial bailout bill. Why are they being obstructionists? Don’t they understand the severity of the crisis?

One might logically assume that House Republicans, who for the most part represent the more conservative elements of the GOP, are opposed in principle to any government intervention. Actually, that does not seem to be the case. The alternative plan the House GOP is proposing would if anything involve *more* regulation of the financial sector. Rather, their main concern seems to be the government’s purchase of mortgage debt from the troubled Wall Street firms, which is the centerpiece of the main bailout proposal.

There are two potential problems with this. First, if the financial firms couldn’t handle all that bad debt, how is the government going to handle it? Treasury Secretary Paulson’s plan assumes that over time, these debt assets will rise in value as the market heals, and can then be sold for a profit. What nobody seems to want to remember is that the reason the debt is bad is that the borrowers are either already in default or at risk of defaulting. Who wants to take over a loan that won’t be repaid? How do you sell that for a profit?

The second problem is what to do with those profits if they actually come into being. You would assume that the  money would go to defray the public debt we are creating by borrowing the money to pay for the bailout, right? Nyet, comrade. The Democrat-drafted bill under discussion would cut out 20% of the profits and give them away through a government program called the Housing Trust Fund. The recipients? Left-wing activists groups such as ACORN and La Raza, which spend as much time championing political causes as they do helping anyone find housing.

So in fact, although it seems like the House Republicans are playing politics with the economy, the Democrats are too – they’re just better at hiding it, with the help of their friends in the news media who choose not to look too closely at the details.

That said, I’m not sure the GOP plan, which would not involve the government purchasing the bad debts, goes far enough in addressing the problem, either. Further compromise is needed.

WashPost has a good article explaining the difference between the two proposals:

http://www.washingtonpost.com/wp-dyn/content/article/2008/09/25/AR2008092500268.html?hpid=topnews

Details on the Housing Trust Fund/ACORN/LA Raza connection: http://hotair.com/archives/2008/09/26/the-democratic-acorn-bailout/

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5 Responses to “Why are House Republicans opposing the bailout?”

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  2. […] Why are House Republicans opposing the bailout? « Sanity Injection […]

  3. Sister Benedict said

    bailout = socialism

  4. sanityinjection said

    Socialism? Maybe in a technical sense. Socialism means the government redistributing wealth, but we usually think of it as taking from the rich and giving to the poor. The poor stand to gain very little from this particular bailout. “Corporatism” or “statism” might be better charges.

  5. sanityinjection said

    Lawrence Kudlow has a column up outlining the likely compromise between Secretary Paulson’s plan and the House GOP plan. I’m still not sure why everyone is convinced that bad loans suddenly become profitable just because the government owns them, but I think this compromise is the best plan I’ve heard so far:

    http://www.realclearpolitics.com/articles/2008/09/a_paulsoncantor_plan_is_a_winw.html

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