The Self-Congratulatory Senate

Like kids on the last day of summer camp, members of the Senate spent a lot of Wednesday congratulating themselves and saying goodbye, and planning their next meeting. Harry Reid, the Democratic leader, and his Republican counterpart, Mitch McConnell, laid out the Senate schedule for the remainder of the year. Then they voted on the bailout package passed it handily and went to meet reporters. Reid praised his colleagues and McConnell praised his. There was lots of bipartisan bonhomie.

But no one should be proud that it came to this. Like the father who bails his drunk son out of jail after he plowed the family Oldsmobile, the Senate did its grim duty, but the problems began much earlier. The lax oversight of the government-sponsored enterprises, Fannie Mae and Freddie Mac, is the responsibility of Congress and a big part of the mess we're in. So is the banking deregulation that led us to this moment, passed by Congress. The Senate may have acted with more unity than the unruly House in passing a bailout package, but it's just as culpable in the crimes that got us to this point.

And of course we should have all figured on Monday, when the bailout went down in the House, that what would revive it would be more goodies--more tax breaks, more borrowing from the Chinese, and more debt. Much of what's been added to the bailout package is long overdue. There's mental health parity in health insurance, a cause championed by the late great Senator Paul Wellstone and the retiring Republican Senator Pete Domenici. There are energy tax credits that needed to be passed to keep the alternative-energy field growing. And there's a sensible hike in the F.D.I.C. insurance cap from $100,000 per depositor to $250,000. But there's pure indulgence, too, like a break in the Alternative Minimum Tax, which Congress has been wrestling with for the past year and which it solved, poof, by just borrowing more money.

It'll be fun to watch House Republicans who decried this bill as creeping socialism suddenly retreat from their Ayn Rand sanctimony and vote for this thing, now that it has some more tax breaks. Their big objection to the original conceit of the plan--having the federal government buy assets--shouldn't have changed. But now that they've seen the consequences of their intransigence, the collapse of the market on Monday, and have been given a few sweeteners, much of that sanctimonious opposition will disappear, even though it's essentially the same bailout plan.

And so we'll start a new regime on Friday. Presumably the bill will pass the House this time and the markets, which are already starting to factor this in, will go up a bit. But the thorny issues of how this bailout will work remain. Will the Treasury buy the assets at the lowest price or sweeten them for the beleaguered institutions? Will there be collusion or chaos among the financial institutions looking to unload their wares? Will there really be enough money to mop up everything? Will L.I.B.O.R. come back to levels of trust?

This is precisely when Congress could redeem itself--and the press too--by applying more scrutiny and more oversight to this bailout than it did to the financial regulations that got us in this mess. We need to watch this thing with vigilance. The opportunities for incompetence and malfeasance are extraordinary.

We'll have more drama in the coming days. It's not certain that the House will pass this thing, and some members will drag out their vote. But in all likelihood it will pass and we'll be on to the next part of this slow-moving train wreck. What's incredible is that when it passes, the House will pat itself on the back just like the Senate did.

by Matt Cooper

Photograph of Senate Majority Leader Harry Reid of Nevada, left, and Minority Leader Mitch McConnell of Kentucky by Jay Mallin/Bloomberg News/Landov

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