Not since the House Republicans scuppered the first version of the TARP bill has the stock market paid so much attention to the legislative branch of government. I have no idea what’s going on on Capitol Hill: the WSJ is reporting that Congress might pass a last-minute bill before Thanksgiving, allowing lawmakers to leave town until January, while the Washington Post is adamant that there’s no deal today and that the fate of Detroit will lie in Hank Paulson’s hands, unless Congress returns for a rare post-Thanksgiving session.
What’s clear is that this is no way to put together a coherent bailout package which carefully balances the interests of all stakeholders. Instead, Washington has descended into unhelpful finger-pointing, with the White House blaming Congress, the Democrats blaming the Republicans, and everybody caring far too much about taking a two-month-long vacation in the middle of a worst economic and financial crisis in living memory.
For the past decade, the markets, when they’ve got into trouble, have looked to Washington for help. Right now, that seems like just another strategy which works until it doesn’t.