We’re living in a dysfunctional age. And our political system is as bad as the economic melt-down America has experienced for the past three years. Part of that, as Ezra Klein cogently explains, is that procedural rules are being used to stall substantive progress.

Harry Reid will head to Freedom Plaza on Pennsylvania Avenue and join the drum circle before a majority of Senators agree to give up their individual powers of obstruction so that the country can be governed effectively.

Via washingtonpost.com from glenn’s posterous.

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The stock market is acting like Jimmy Carter. Down another 500 points despite looser credit, cheaper money and Apple's amazing profits. "The malaise on Wall Street simply will not lift." Markets Fall Sharply on Weak Earnings Reports [NYTimes.com]. So what good is a Republican Administration when even financial sector people have totally lost confidence? None at all.

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Again today the stock markets cratered, globally, despite lots of intervention and reassurance by financial regulators. Last week’s $700 billion bailout and ban on short selling were not not enough. This week’s governmental purchases of commercial paper were not enough. And even today’s promise of interest rate cuts —which analysts said the market was looking for — had the opposite effect. Markets Plunge Despite Hint of Rate Cut [NYTimes.com].

These are frustrating times. Most of the plunge is driven by mob psychology, where a dip turns into what investors hear as a call to panic. But the fundamentals have not changed and, ironically, it is developing markets — with the most future promise and highest growth rates — that have perversely taken the greatest beating in this down cycle. The “technical” analysts have their charts out, to no avail, and we can all agree that the 1973 hypothesis that Wall Street is a “random walk” is no longer valid.

Perhaps this is the price we pay for democratizing investment. With everyone invested in the markets, what used to be ripples are now typhoons or tsunamis!

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So the consequence of making absurd investment decisions in real estate is that, if you are a banker, the government spends $$ trillions to bail you out. Bernanke Reiterates Need to Act Quickly, Clarifies Comments on Valuing Assets [WSJ.com]. Worse, the Bush Administration is advocating immediate passage and unreviewable discretion in what the Treasury Department does with all that money. As I see it, since depositors are insured, who cares how many banks fail due to poor real estate investment decisions? That’s why we call it a market economy. If the risk of failure does not exist, there will be absolutely nothing enforcing financial discipline on the bankiong sector in the future. That’s bad for the economy and bad for consumers. We should let the subprime bankers twist slowly in the wind for awhile. Enough with the bailouts already!

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It’s chairman was a crook, its investments were stupid, nothing it does affects consumers and it has absolutely terrible TV advertisements. So what the heck justifies US$85 billion for AIG? Did We Say No More Bailouts? [Forbes.com]. Forbes opines that this “prov[es] that pragmatism trumps conviction in the historic financial crisis sweeping through the world’s financial markets.” Not at all. It is simply white shoe, country club brothers helping each other out, with free (i.e., taxpayer) money. Read carefully:

Federal officials worried not about AIG’s ability to insure its ordinary customers — those assets are kept in myriad subsidiary units of the company, all closely regulated by state governments in the United States, as well as Europe and elsewhere. The major concern was AIG’s massive exposure to credit default swaps, essentially insurance products for corporate debt.

Meaning that the Wall Street gamblers who experimented with exotic financial instruments face absolutely no market discipline and have no cost of failure. This sort of permissiveness in the face of naked greed and business malfeasance has a price, which we are already paying. G.M. and Ford Officials Seeking U.S. Loans to Meet Fuel Goal [NYTimes.com]. None of this would have even been thinkable 30 years ago, let alone if the Reagan Revolution was something Republicans like George W. actually believed in. Who stepped up with a bailout when the dot.coms and telecom firms all collapsed in 2000? For a nation that has led the world in promoting open, competitive markets, shielding large financial institutions from the price of their own mistakes is backwards. Depositors and investors are insured. Those guys should be in jail, not on bail!

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