Hill Huffing

It’s hard to watch the Congressional hearings on Capitol Hill. The chest beating and bewilderment expressed by the nation’s lawmakers seems a tiny bit overdone, doesn’t it? Meanwhile, investors around the globe are anxiously awaiting consensus, so that we can try to move forward.

Things sure have changed in a week. Last Thursday at around lunch time, it really looked like the financial markets were on their way to a major melt-down. We are not talking a few percent each day… the system was freezing up, both Wall Street professionals and individual investors were in full blown panic mode (as a former commodities trader, I recognize what that looks like) and the world was bracing for a calamity.

After Paulson and Bernanke consulted with the President and leaders of Congress to tell them what was really going on and their plan to help stave off financial disaster. I remember watching the lawmakers as they walked out of their meeting with Paulson and Bernanke—they looked shell-shocked. As we learned about the details of the meeting and the planned government intervention into the crisis, a funny thing happened: markets recovered and investor confidence started to become restored.

Then they started to talk…and talk and talk and talk. I understand that some of these elected officials are trying to ask reasonable questions about the plan---but can’t they get to the point a little more efficiently? In the three days since the Hill huffing and puffing began, the Dow has given back 563.27 points and fear has crept back into the system as investors around the world gobbled up short-term Treasury bills in a flight to quality. Yesterday morning, the yield on the one-month T-bill fell to 0.01% and buyers were willing to accept almost a zero percent return to know that their funds were safe. The one-month bill ended the day at 0.2%. Do we need to talk much more before we are back to last week’s levels? That’s why President Bush went prime-time last night. He needed to say that “our entire economy is in danger” and warned of "financial panic" and ultimately "a long and painful recession" if Congress doesn't move quickly. Amen, Mr. President!

We can’t conduct Congressional hearings on why the Titanic has hit the iceberg—we already hit it, so let’s figure out how to prevent disaster. Early this morning, the Wall Street Journal was reporting that “Democratic leaders hope to nail down details of the measure early Thursday,” before an afternoon summit at the White House with the President, McCain, Obama and top leaders from Congress. The likely bill “would include limits on executive pay in situations where the government puts a large amount of money into a failing institution. In certain cases, the government could receive warrants that would give it the right to acquire shares in the company. Also included is beefed-up oversight through the Government Accountability Office, an investigative arm of Congress. Likely not included is a controversial idea to let judges alter the terms of mortgages during bankruptcy proceedings.” Those additions to the plan seem fine, but please, let’s stop the huffing before the whole house blows down!