World markets take a beating on bailout failure; Update: White House “considering” TARP fund loan; Update: TARP funds coming

posted at 9:16 am on December 12, 2008 by Ed Morrissey

Doing the right thing doesn’t necessarily mean that no negative consequences will arise, and the world markets have delivered those this morning after the failure of the automaker bailout package last night in the Senate.  International exchange indexes have dropped between three to six percent overnight on the news, and the futures market for Wall Street looks equally grim:

World stock markets plunged Friday as the U.S. Senate’s rejection of a $14 billion deal to rescue Detroit’s ailing automakers stoked concerns that the recession in the world’s largest economy will be even longer and deeper than projected.

The FTSE 100 of leading British shares was down 127.87 points, or 2.9 percent, at 4,260.82, while Germany’s DAX fell 185.22 points, or 3.9 percent, to 4,581.98. The CAC-40 in France fell 130.48 points, or 4.0 percent, to 3,175.65.

Earlier, Asian markets tumbled, with Japan’s Nikkei 225 stock average down 484.68 points, or 5.6 percent, to 8,235.87. Hong Kong’s Hang Seng index slid 5.5 percent to 14,758.39.

U.S. stock index futures pointed to a big sell-off later on Wall Street. The Dow Jones industrial average was projected to drop 259 points, or 3.0 percent, to 8,311, while the broader Standard & Poor’s 500 index was forecast to fall 32.90 points, or 3.8 percent, to 841.60.

They needn’t be too concerned.  Based on Politico’s reporting of remarks made by VP Dick Cheney to a group of Republican Senators on Wednesday, the White House appears ready to ride to the bailout rescue:

Administration officials have been warning for weeks that failure to pass the bill could lead to an even deeper recession.

That was the message Vice President Dick Cheney brought to a closed-door Senate GOP lunch Wednesday, reportedly warning that it’ll be “Herbert Hoover” time if aid to the industry was rejected, according to a senator familiar with the remarks. A Cheney spokeswoman would neither confirm nor deny the vice president’s remarks.

The White House could still use its authority under the financial bailout law known as the Troubled Assets Relief Program to provide aid to the industry, but the Bush administration has strongly resisted that approach. Meanwhile, Federal Reserve Chairman Ben Bernanke has warned that he could not be relied on as a backstop if additional loans were needed for the first quarter of next year.

“Herbert Hoover time”?  That’s a pretty serious misreading of history.  The Great Depression started off as a credit crisis of sorts, with margin calls going unanswered after a stock market crash.  However, that just set off a sharp recession.  It didn’t turn into a Great Depression, with deflation and capital destruction, until Hoover started massive government intervention in the marketplace, raising taxes and erecting trade barriers.  FDR followed that with even higher taxes and massive government jobs programs that stripped the private sector of badly-needed investment capital as well as opportunities to perform those same tasks more efficiently.

If anything, this bailout mania has been much more reminiscent of Hoover than the vote yesterday.  And Hoover didn’t have the lessons of history that Cheney and the rest of the bailout disciples have today.  We saw what massive government intervention did to markets then, and what it did to credit markets over the last ten years.  When will people finally learn that government distortion creates massively bad results?

Without a doubt, the Bush administration will look at the markets and panic — again — into cutting big loans to automakers.  If that doesn’t happen by the closing bell today, it will happen before the markets open again on Monday.  At this point, though, the Bush administration is history, not the future, and they can answer for their ridiculous economic policies over last two months when the automakers demand even more subsidies to continue doing exactly what led them into near-bankruptcy in March.

Update: Right on time:

The White House said Friday it is willing to consider using some of the $700 billion Wall Street bailout fund to help the U.S. auto industry. …

The White House said it was evaluating its options in light of the breakdown on Capitol Hill.

“It’s disappointing that Congress failed to act tonight,” Deputy Press Secretary Tony Fratto said in a statement. “We think the legislation we negotiated provided an opportunity to use funds already appropriated for automakers and presented the best chance to avoid a disorderly bankruptcy while ensuring taxpayer funds only go to firms whose stakeholders were prepared to make difficult decisions to become viable.”

By the closing bell today.  Bet on it.

Update: Fox Business just issued an on-air report at noon ET saying that Treasury has indeed decided to use TARP funds for the bailout.  I told you so.


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Let’s hear it for Ron Gettelfinger!! Faced with the prospect of a free lunch, he turns it down so that the UAW can keep sucking blood out of the corpse…thankfully someone in the Senate was smart enough to see
that putting more blood in the carcass wasn’t a workable
solution…’give it up’ for Mitch McConnell!

sdd on December 12, 2008 at 2:00 PM

We’re witnessing our entire government acting without fear of the people holding them accountable.

A Dem Congress overwhelmingly supported TARP (with help of Republicans, of course) and the American people had the chance to send them a message and they didn’t.

terryannonline on December 12, 2008 at 2:04 PM

GWB, Foxtrott Yankee. I always wanted to say that to a president, while I still am free to do so. This is an applicable moment.

Entelechy on December 12, 2008 at 12:14 PM

Heh.

Jaibones on December 12, 2008 at 2:05 PM

Despite Because of the new deal the US economy continued in the doldrums throughout the 1930s …
jerryofva on December 12, 2008 at 12:21 PM

Fixed it for ya …

PackerBronco on December 12, 2008 at 2:05 PM

terryannonline on December 12, 2008 at 2:04 PM

Yes. The lazy American public are a huge part of the problem.

LimeyGeek on December 12, 2008 at 2:07 PM

Uh, so if anti-free market tampering helps the stock market, why would they react to some temporary sanity ( “failure” to bailout )when Obama will be taking over in a few weeks? The market is supposed to reflect the future, no?

I’ll be boycotting any nationalized auto makers.

Buddahpundit on December 12, 2008 at 2:08 PM

I’ll be boycotting any nationalized auto makers.

Buddahpundit on December 12, 2008 at 2:08 PM

If this goes down the way it appears to be going, I’ve bought my last unionized vehicle.

The Japs can have my business.

LimeyGeek on December 12, 2008 at 2:11 PM

Last time I looked I can be a capitalist and not want to organize protests.

But you took exception to the boycott, not the protests:

Boycott an industry already in trouble? Why?
Yeah while putting millions more people out of jobs?

Consumers boycotting a company is capitalism.

Protesting the government over their grotesque, never-ending (feckless) bailouts is defending the Constitution, and yourself, from the despots in DC.

Rae on December 12, 2008 at 2:14 PM

Yeah while putting millions more people out of jobs?

terryannonline on December 12, 2008 at 1:37 PM

It’s now, or later, after so many more gazillions. The unions have to restructure, or else the companies can’t compete. Period.

You are a nice person, but as I wrote before, my hope is that you enlighten yourself. The sooner you get a reality check, the easier your life is going to be. If not, you will either be hurt, or live in a ficticious world, dreaming, and not being free. It’s up to you.

Entelechy on December 12, 2008 at 2:15 PM

A Dem Congress overwhelmingly supported TARP (with help of Republicans, of course) and the American people had the chance to send them a message and they didn’t.

We DID send the message. They ignored it.

Rae on December 12, 2008 at 2:15 PM

Last time I looked I can be a capitalist and not want to organize protests.

terryannonline on December 12, 2008 at 2:00 PM

Protests are insignificant here.

You can pump all the blood you wish into a patient who’s bleeding hasn’t been stopped yet. Just think about that for a while. Utopian idealistic naivete will take you nowhere, unless you’re a pathological narcissistic cipher, and the plankton banks follow you, like Obama.

Entelechy on December 12, 2008 at 2:19 PM

We DID send the message. They ignored it.

Rae on December 12, 2008 at 2:15 PM

Uh, no the American people didn’t send a message. In November the American people had the opportunity not to vote those who supported TARP in Congress and they didn’t. In fact, the Dems (the party that overwhelmingly supported TARP) obtained more seats in Nov.

terryannonline on December 12, 2008 at 2:19 PM

Uh, no the American people didn’t send a message. In November the American people had the opportunity not to vote those who supported TARP in Congress and they didn’t. In fact, the Dems (the party that overwhelmingly supported TARP) obtained more seats in Nov.

terryannonline on December 12, 2008 at 2:19 PM

And we deserve exactly what we voted for. May we be scroomed royal before we wake up, and may it not be too late for our country and its children.

In the meanwhile the media, the libtards, McCain, and some righties are in an inseparable, dog-like, coitus with Obama. May it last at least 2 years, while we’re going to be raped in our wallets. We really need to learn the hard way. The “shopping” and “apathy” way hasn’t taught us anything.

Entelechy on December 12, 2008 at 2:26 PM

Uh, no the American people didn’t send a message.

Uh, I meant during the weeks TARP was being considered. I wrote them 3 times a day, sometimes more and called their offices at least one a day. And did you happen to see any of the polling with regard to TARP? That was a message, and they ignored that, too.

The polling for the Big 3 Bailout didn’t exactly show overwhelming support either. They ignored us again.

For myself, I did not vote for anyone who voted for it, not even to vote for the lesser of the two evils.

Rae on December 12, 2008 at 2:27 PM

Yes. The lazy American public are a huge part of the problem.

LimeyGeek on December 12, 2008 at 2:07 PM

I don’t think it is necessarily fair to generalize that the American people as lazy. I am not lazy when it comes to my responsibilities but I also have to work for a living. I work about 60 hours a week at two jobs.

I don’t always have time to call or write my congressman. But I do have time to vote.

Mr_Magoo on December 12, 2008 at 2:49 PM

50-60 years from now (if our republic still exists), when we have finally worked our way out of the 6 foot grave in which this history-repeating drive to socialization has placed us, we will not be judged kindly.

bilups on December 12, 2008 at 3:24 PM

You know, it’s funny…

George Bush has done more to destroy this country in the last eight months than anything he did in the last eight years. It’s almost as if he was TRYING to drive the country straight into the ditch.

Was he really a secret Democrat, running as a Republican so as to permanently destroy the Republican party? It wouldn’t surprise me that much….

bk1958blue on December 12, 2008 at 3:34 PM

Mr_Magoo on December 12, 2008 at 2:49 PM

Fair? What concept of “fairness” applies here? I appreciate it’s a generalization, and that literally not every single American is lazy, but when it comes to exercising political power, we’re a joke. A lazy, good-for-nothing joke.

A pathetic portion of our population even gets off their fat arses to vote. Of those people, an even more pathetic portion actually have a clue what they’re voting for.

I stay informed, think for myself, get involved with “lobby day”, and email my representatives on a regular basis.

Gee….I even studied all the founding documents before I moved here, and continue to study them when the mood strikes.

I daresay I’m more informed than a vast percentage of the public (upper 90′s %), and yet I don’t consider myself as doing anything that is beyond anyone else.

When I think of how much we have here, how much people have worked & fought for, and I see my fellow Americans – by birthright – squander their legacy, it makes my blood boil.

When I refer to them as “lazy”, I’m letting them off extremely lightly.

LimeyGeek on December 12, 2008 at 3:34 PM

Please call your reps and ask them to support this legislation. For one thing, it repeals TARP.

Rae on December 12, 2008 at 3:57 PM

US Taxpayer screwed again.

GarandFan on December 12, 2008 at 4:12 PM

LimeyGeek on December 12, 2008 at 2:11 PM
Buddahpundit on December 12, 2008 at 2:08 PM

Unfortunately you’ll find out that Japan has given some national support to their car companies. Korea has done it in the past with their chaebols. India has done it as well with theirs before the end of the License Raj. Germany makes muscle, but deep pockets and unionization are the rule. That leaves China, where the best you get from them is a poor copy of a car made by an auto parts manufacturer with a large government interest.

I’ll be glad to help take up the slack. I’ve always wanted to get new, top-shelf Detroit muscle for fire-sale prices. Thank you for your efforts.

sethstorm on December 12, 2008 at 4:33 PM

sethstorm on December 12, 2008 at 4:33 PM

Nationalized help (not endorsed) may be one thing but Detroit is still does not make a desirable product nor are they competitive.

nolapol on December 12, 2008 at 7:11 PM

Tell these clowns what I tell my brother-in-law. WHAT DO I LOOK LIKE? A BANK?

raybojabo on December 12, 2008 at 7:41 PM

nolapol on December 12, 2008 at 7:11 PM

You fail to recognize that there are people who would buy those cars. Plenty of them who look to see that they make affordable performance.

sethstorm on December 12, 2008 at 8:32 PM

If there was no frickin’ expectation in the world markets for taxpayer subsidies to failing private enterprise and failing UNIONS, there wouldn’t be so much as a mosquito fart in the world markets.

What the hell have we come to?

Saltysam on December 12, 2008 at 9:16 PM

In my fantasy world, the 60%+ of Americans who oppose these bailouts start voting with their wallet by shunning companies suckling at the Federal teat, and supporting companies that resist the temptation, even if their competitors do not. In this case, it would mean buying Ford, boycotting GM & Chrysler. There is far greater manufacturing capacity than there are customers. Why wouldn’t rational customers preferentially buy from a company that shows the minimum management competence of understanding their marketplace and operating without bailouts? If more consumers make this choice, it would keep the Ford lines running, and shut more GM lines down.

Don’t get me wrong. Ford CEO Alan Mulally did not cover himself or his company in any more glory than the rest of the bozos in either of his two appearances before Congress. But this week, Ford finally got it right, and said they would not take Federal money this round. Maybe I am grasping at straws, but it’s something.

mw on December 12, 2008 at 9:45 PM

When I refer to them as “lazy”, I’m letting them off extremely lightly.

LimeyGeek on December 12, 2008 at 3:34 PM

They’re not lazy. They’re busy.

I’m not making excuses though.

A large percentage of the population, though busy, are spoiled brats. They’ve no understanding of their responsibility, and have come to expect everything to run of its own accord.

Personally, I believe that we’ve finally come to the end of the peace dividend from WWII, and they’ve no idea that is why they’ve been spoiled.

Hell, they’ve no idea they are spoiled.

Saltysam on December 12, 2008 at 9:45 PM

Ford finally got it right, and said they would not take Federal money this round. Maybe I am grasping at straws, but it’s something.

mw on December 12, 2008 at 9:45 PM

I own two Fords.

If they refuse Federal money, I’ll buy another one.

Saltysam on December 12, 2008 at 9:48 PM

TARP requirement : Granholm must go

joey24007 on December 12, 2008 at 11:13 PM

I own two Fords.

If they refuse Federal money, I’ll buy another one.

Saltysam on December 12, 2008 at 9:48 PM

Me too.

I love my Ford.

Texas Gal on December 12, 2008 at 11:33 PM

I’ve got a dinner party planned for tomorrow night, but anytime after that I’m available for rioting in the streets.

Anyone else free for violent protests either this Sunday, or possibly next weekend?

Tiki torches are not that intimidating on their own, but if we all bring one (don’t forget to bring oil and a lighter) we might make a pretty strong statement.

I’m in the Atlanta area.

Dorvillian on December 12, 2008 at 11:44 PM

This is some of the most tortured logic yet. The markets started out with a modest downturn Friday morning which the media attributed to the bailout. We were promised an Armageddon of sorts, nothing remotely resembling that emerged. In fact the Dow regained positive territory which the media now attributed to the “possibility” that there would be an alternate bailout. At market close the markets were modestly in the green.

In spite of all the talk of panic and drama there was very little. And its not clear that much of it was a reaction to the bailout issue at all. Don’t forget that the other news hitting investors was a 50 billion dollar scam that impacted investment funds.

Hard not to conclude that some folks are selling tickets for a wolf show that isn’t coming to town. The fact that Bush/Cheney and Obama/Reid are aligned on this one is truly disgusting.

DaMav on December 13, 2008 at 2:11 AM

I guess I’m in the minority. We are going to have to do something. I’m not convinced that rooting for bankruptcy is exactly the best road to travel.

I like this mini bailout idea. The companies won’t go bankrupt under Bush and the Dems will have to deal with the mess they have created.

Mortgage crisis induced economic peril, and unions that cripple competitiveness and amplify risks in slow times.

These are Democrat problems. They have 2 years to solve them and the clock started a month ago.

I think the Republicans in the Senate missed a chance here to get some concessions from the union.

I’m certainly not a big fan of unions, or government involvement in business – but should the government really sit by during an economic crisis and do nothing at all in every instance? When would you intervene?

Mr Purple on December 13, 2008 at 5:14 AM

Mr Purple on December 13, 2008 at 5:14 AM

Common sense is what you have sir. Being a realist is never popular when things are going wrong but it is a good position to have none the less. Keep plugging away and you’ll eventually find you are correct.

kanda on December 13, 2008 at 12:20 PM

This is being handled with the same adroitness as the War on WTF.

BL@KBIRD on December 13, 2008 at 12:34 PM

Um… Henry Paulson = Wesley Mouch?

Ortzinator on December 13, 2008 at 1:40 PM

We both provide loan guarantees and force Chapter 11 restructuring. A bankruptcy trustee can use the guaranteed funds to ensure that suppliers are not infected by the cash flow contagion, and thereby reduce ripple. Chapter 11 allows the automakers to stare down the UAW/CAW. At the end, the big 3 emerge efficient, or terminal.

In either case, the landing is softened, and the contagion more or less contained.

It’s not Chapter 11 or loan guarantees: it’s both.

shaken on December 13, 2008 at 1:42 PM

As noted elsewhere here, it looks like the LA Times felt like it had to lie about the vote.
 
They said that the vote needed 10 republicans without mentioning the fact, that exactly 10 republicans did indeed vote for the measure. It failed by 7 votes. If the dems had had control of their defections and absences, the measure would have passed. A total of 8 dems either defected or did not vote.
 
A better headline would have been ‘Lazy, Inept Dems Lose Bailout Vote’

ElRonaldo on December 14, 2008 at 1:21 AM

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