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This bill is so incredibly stupid, it has the potential to be the Smoot-Hawley equivalent of our times.
Bailout Passes, Stocks Limp
Minyanville Professor Kevin Depew is writing Five Things You Need to Know: Bailout Passes, Stocks Limp.
How can this be? How can the passage of the Bailout Bill find stocks limping awkwardly into the close? Wasn't this supposed to be our finest hour? The desperate resolution to the year-long crisis? Well, the reality we have tried to reveal here in Minyanville is that the Bailout simply will not work.So What Happens Now?
The credit markets have spoken. And they are saying - no, they have been saying all along - that the $700 billion Bailout Bill is nothing but a gnat attacking a buffalo. There has been an ongoing disconnect between stocks and credit markets for months now and even the action on Monday did little to correct it.
There is only one thing necessary to understanding what is happening and it is this: no one at U.S. Banks, no one at the Federal Reserve and no one in politics can accept the reality that real estate assets in this country remain oversupplied, overpriced and overleveraged.
It is that simple.
TAF, TSLF, SuperSIV, TARP, none of that matters. No matter what acronym is created to disguise the fact that assets are overpriced, or what government intervention is created to prop up those asset prices, the market will inevitably overpower it. This time is not different. In fact, it is continuing to play out almost exactly as the Great Depression did. The bottom line is that despite the bailout, risk in owning stocks has increased, not decreased.
My thoughts on this historic and unconstitutional moment (there is no constitutional authority for the government to bail out private enterprise at taxpayer expense), can be found in Bailout Bill Passed, So What Happens Now? If you have not yet done so, please take a look.
Many have been asking for a list of how everyone voted.
Here it is.
Monday House Defeat of the Bailout Bill
Wednesday Senate Passage
Friday House Passage
President Bush, Treasury Secretary Paulson, House Speaker Nancy Pelosi, House Finance Chairman Barney Frank, ECB president Jean-Claude Trichet, UK Prime Minister Gordon Brown, CNBC, CNN, and Bloomberg were all cheerleading this fiasco.
That is pretty tough competition. They won. History will be the judge as to who was correct.
Mike "Mish" Shedlock
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