Understanding the Political Process: The Bailout
The proposal formerly known as the Paulson Plan is in trouble.
We have suggested that new policies are difficult to pass, especially in a short time frame. The market incorrectly responds to any apparent agreement between some of the parties, thinking that a plan is imminent.
What is Needed
Any plan needs support from the following:
- A majority in the House. Since some House Dems will oppose the bill (they need to, and will be released by the leadership if their votes are not required) some GOP votes are required;
- Senate Dems;
- Senate GOP, estimated at 40 votes earlier today, before the McCain intervention;
- President Bush and Sec. Paulson, since the bill must get signed;
- The candidates, since they have the power to derail the proposal.
If there is any significant opposition, there are various rules and procedures that can delay proceedings for days -- or longer.
Investing?
The market "voted" last week on the need for some plan. We are about to learn whether such a massive policy can be adopted in a short time. Congress has been asked to accept the equivalent of a declaration of war. Even Warren Buffett made a Pearl Harbor analogy.
As we have noted, it is our misfortune to be dealing with this during election season and in crisis mode.
Investors looking for the time to buy should watch carefully for a strong indication that all of the relevant parties listed above are truly on board.
