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The Economic Crisis - Now What? Michael Ettlinger of the Center for American Progress offers his take on the latest news out of Washington and the financial markets after U.S. Treasury Secretary Henry Paulson and President George W. Bush yesterday failed to convince a majority of their own party in Congress that the consequences of failing to pass their $700 billion financial rescue package could be catastrophic for the U.S. economy. The American people over the next few days will catch a glimpse of the consequences in financial markets, at their hometown banks, and at their jobs, but should congressional inaction persist we may not experience the full brunt for a month or more. Thats why these next few days will be so telling. If those who opposed the rescue package in Congress do not feel responsible for the leading edge of the problems they have allowed to grow—as prices fall, borrowing costs rise, and more and more small- to medium-sized companies and financial institutions are unable to access credit—then they are unlikely to change their minds about the bailout plan. If their constituents do not get antsy as the problems of Wall Street start to spread to the companies they work for and to their own access to credit, and they do not demand action—no action may be forthcoming. Will the financial markets spook enough of the dissenters to change their vote on the bill, which fell only 12 votes shy of passage? That probably depends most immediately on how dramatic the reaction is in the commercial paper market, which was largely done with trading yesterday before the bailout bill went down to defeat. This vital credit marketplace—where companies tap short-term credit to smooth out their cash flow needs to make payroll and pay suppliers in a timely fashion—could react sharply today. This mornings record high for the benchmark London Interbank Offer Rate—the rate at which ...
Length: 05:09


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