The System Works

Washington Mutual failed yesterday. The government took it over and sold off some assets to JP Morgan Chase. Not one customer account will be affected, and not one dime of taxpayer money has been used in the rescue.

This is how the system is supposed to work. WaMu made a lot of crap loans and paid the price. Chase's purchase means that the FDIC funds weren't even depleted. I know that a lot of people think we must do something right now but it has to be the right thing. Panic is unnecessary, particularly if it translates into throwing hundreds of billions of dollars at the same people who caused the problem.

I guess Bush is trying to salvage the deal, so Lord help us. The House Republican proposal is batshit insane and should be rejected entirely. The end result of this at this point ought to be a small amount offered to bridge us through Inauguration Day, when the next President can come in and start over. Republicans want the economy to fail, and they shouldn't be allowed to dictate the debate.

UPDATE: This is the best analysis I've seen, and no surprise, as it's from Krugman:

First of all, we have the Republican Study Committee blowing things up with a complete nonsense proposal — solving the crisis with a holiday on capital gains taxes. How is that possible? Well, if a party runs on economic nonsense for 25 years, eventually many of its foot soldiers will be people who actually believe the nonsense.

More specifically, though, the failure to get a deal reflects the betrayals of the Bush years. Democrats weren’t going to trust Henry Paulson, because behind him they see the ghost of Colin Powell (and Paulson’s “all your bailout are belong to me” proposal, aside from being bad economics, showed an incredible tone-deafness.)

And after the way the Bushies and their allies double-crossed the Democrats again and again in the aftermath of 9/11 — demand national unity, then accuse you of being soft on terrorists anyway — there’s no way Pelosi and Reed will do the responsible but unpopular thing unless the Republicans agree to share ownership.

So what we now have is non-functional government in the face of a major crisis, because Congress includes a quorum of crazies and nobody trusts the White House an inch.

As a friend said last night, we’ve become a banana republic with nukes.

All the more reason you want to send it to the voters for a mandate. Republicans would rather see a Great Depression than end their worship of free-market ideology. They're nuts. Let the voters decide.