The bailout is coming

WASHINGTON, Sept. 22 (UPI) -- The bailout is coming. It is going to be by far the biggest and most risky federal intervention in the American financial system in more than three-quarters of a century. And while everyone hopes it will succeed, no one, including U.S. Treasury Secretary Henry Paulson and his planners, is sure that it will.

Some members of the 111th Congress who already have been briefed on the underlying crisis have said they have been warned that the problems the United States faces financially are potentially greater than the Great Depression itself and the threatened meltdown of the national banking system that President Franklin D. Roosevelt averted during his very first week in executive power in April 1933.

These warnings are not mere hyperbole: Unfortunately they rest on sober fact. In 1933 the United States was still the greatest industrial power in the world with the greatest financial reserves on Earth. It was also the world's No. 1 producer of oil, and it enjoyed, even throughout the Great Depression, a clear balance of payments trading surplus with the rest of the world. The only thing the hapless President Herbert Hoover did right was to maintain the top-level credit worthiness of the federal government throughout the three and a half years of national economic collapse, which he failed to alleviate in any other significant way.

However, today, by contrast, the U.S. government is more in debt every year, thanks to the policies of President George W. Bush, than it has ever been in its history. The United States is the largest importer of oil in the world and in the history of the world, and its annual balance of payments trade deficit is the largest in both dollar and absolute terms of any nation in recorded history. At least 30 percent of U.S. Treasury bonds are held by the State Bank of China alone. Japan holds even more.

Even now, no one knows how much the bailout is going to cost. Paulson and his team say the minimal figure is $500 billion, with the figure of $700 billion already being thrown around and even $1 trillion is already being cited as possible. As Bush said, with his usual grasp only of the finally obvious, "It's a big package because it's a big problem."

Could the U.S. economy actually be on the verge of total collapse? Amazingly, the answer has to be: possibly yes.

If all international investor confidence evaporated in Bush's nearly eight-year Ponzi scheme of boosting economic growth through rock-bottom interest rates without any acknowledgment of economic realism, a total collapse unfortunately could indeed come. Interest rates should have been allowed to rise to the region of 10 percent to 15 percent years ago, and both the Republican and Democratic congresses facing Bush should have reined in the Niagara of fiscal debt that his policies were generating. But, of course, neither party as much as raised a finger to stop it.

Finally, the 111th Congress and the leaders of both parties who remorselessly let this catastrophe develop over the past decade are now facing the Appointment with Destiny that none of them imagined they would ever have to meet. At long last, when the wolf has already eaten Wall Street, even the Democratic leaders of both houses of Congress agreed with their for so long feckless chief executive that something needed to be done within a week.

Typically, the Congress is being offered only a tightly scripted role by the very administration that let the crisis develop in the first place. And also typically, leaders on both sides are showing their usual supine natures in going along with it. In part, this really is a belated sense of bipartisan patriotism and responsibility at the 59th minute of the 11th hour before the Doomsday Clock strikes. But it also reflects the harsh fact that, with the exception of Rep. Ron Paul, R-Texas, the entire Congress in both houses repeatedly has proven themselves to be financial illiterates as the crisis loomed.

In fact, there appears to be very little disagreement with the core of the administration's bailout proposal on either side of the aisle on Capitol Hill. And while more than a little bickering and micromanaging is inevitable among 535 self-important legislators who are overwhelmingly lawyers, none of them is going to want to go on record as significantly delaying, let alone preventing, a crucial measure that may be the last hope of avoiding the collapse of the domestic U.S. economy. As it showed after Sept. 11, 2001, the U.S. Congress is an institution that is second to none in its speed in bolting the stable door after the horse has bolted -- especially when it has spent years ignoring all the warnings it received that the horse was going to bolt.

The crisis also highlights the question: Who runs the United States when it comes to fundamental financial/economic matters? Right now the answer is that the treasury secretary and the chairman of the Federal Reserve are doing that job. The president and the Congress have been sidelined and are only stepping forward to play roles when called upon. Even Vice President Dick Cheney is nowhere to be heard from.

And on the rare occasions when the campaigns of Republican presidential nominee Sen. John McCain of Arizona and Democratic presidential nominee Sen. Barack Obama of Illinois have had things to say about the crisis, they have seemed mostly irrelevant.

It's some crisis to make a presidential campaign a secondary news story. And the crisis has only begun.