US economy is in troubled waters since the collapse of insurance and mortgage giants started because of falling reality market and outrageous portfolios. But long after the fall of Merrill Lynch and Lehman Brothers and the desperate bailout of AIG to get the situation under control, the fall spree at Wall Street doesn’t seem to be close to ending due to the confused mentality of US lawmakers when it comes to the issue of setting the limit of interference. The wretched depression, strikingly similar to the Great Depression has initiated a worldwide currency shortage, dangling stock indices and has already taken its toll on Washington Mutual and some other prime players. Washington Mutual was sitting pretty at the time when Lehman fell because it was a top notch insurance company and was famous for its spend thrift nature and any event that would cause its fall looked unlikely. It was among the 10 firms of Wall Street that initially set a $70 billion fund to see off the aftermaths of selling of Merrill Lynch and Lehman Brothers, but events took a vicious turn and Washington Mutual is now in JP Morgan Chase’s hands for a mere $1.25 billion, when speculations caused the widespread withdrawal of funds.
In an effort to end the crisis, the US government set aside an ambitious plan of an economy bailout that implied setting aside a huge fund of $700 billion to buy troubled assets and firms – largely at the expense of common man’s money. As expected, the idea of Washington playing Wall Street faced huge public disagreement. The Congress ensured that the bailout plan was defeated in spite of the desperate efforts of president in securing the vote and it resulted in Dow Jones falling further by 778 points. Congress has finally agreed to revote on bill. There are two possible scenarios now, the first being that if the plan gets tweaked enough to pass safely through Congress (which is unlikely as it would require heavy changes) and second being that the Government would continue acting the way it has been till now and work with limited tools of getting some other non troubled firm to buy troubled companies like it has been doing with JP Morgan Chase & co.
Bush has already warned the Congress that if the bill fails, it would result in long lasting disasters as the 778 point plunge on Monday caused a wealth loss of $1 trillion which is makes even $750 billion look meagre. With presidential elections scheduled in November, the fate of this bill hangs in balance as both the candidates (John Mc Cain and Barrack Obama) will not like to inherit a troubled market as many officials see bailout as a burden on common man and reward to Wall Street who should have been more careful before investing funds recklessly.
The bill goes for revote on Wednesday, and getting enough positive votes will depend on the amount of modifications worked into the bill and the ability of Bush to pursue opposition leaders and assurance towards ending this economic depression. Henry Paulson who already has earned the nickname of “King Henry” is also pressing hard to get the bill passed and will have to pass through tough testimony of the Congress in justifying this huge bailout idea.
Trouble is looming larger and larger and has started engulfing world markets as the news of bailouts being carried out in UK are floating around, the Europeans are slowly succumbing to the American crisis (owing to heir large exposure to Wall Street) and as the recent news of Belgium and France governments stepping in to save Dexia SA by lending $9.2 billion to this bank who at one time used to give loans to local governments. As we see an array of forces lined up against this US bailout plan it remains critical to see how hard does Bush pushes its economy and taxpayers money to insulate “Main Street” from Wall Street and say goodbye to White House with Wall Street back on track with profit making ways and taxpayers money secure as ever.
Image Source: http://www.flickr.com/photos/myeye/2900540902/