Twofish's Blog

February 24, 2008

Note on the politics of subprime

Filed under: china, finance — twofish @ 5:29 pm

The politics of the situation is that Congress wants to keep hands off of this for as long as possible. The problem for Congress is that if it does get involved, then some people will (correctly) blame it for doing too much and giving a bailout to the banks and other people will (correctly) blame it for not doing enough and letting poor people get kicked out of their houses and causing the credit market to grind to a halt.

The political solution that Congress wants is to look good by allowing for easy credit and providing goods and services to “good honest working class Americans” while not looking bad by providing “corporate welfare to fat-cat Wall Street bankers”, Trouble is that you can’t do one without the other.

So as long as it can be handled by the Fed, they”ll let the Fed handle it, and whatever political costs exist they can get through it by “blaming Bernake.”


1 Comment »

  1. Congress and Subprime – Passing the Buck

    Over at twofish’s blog we see an interesting note that discusses why Congress won’t be rushing into subprime reform anytime soon.  He tends to think that the Fed will continue to take control (and the blame) of this problem.

    Trackback by Subprime Problems — February 25, 2008 @ 2:32 am

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