Richard Shelby, the Republican senator from Alabama, is the ranking GOPer on the Senate Banking Committee, making him one of the most influential men in Washington on legislation aimed at dealing with the economy. But judging by his confused appearance on CNBC Tuesday morning, neither he nor the Republican Party has any real clue or strategy about how to go forward.
On Monday, Shelby told an audience in Alabama that he was prepared to filibuster the stimulus bill. But, as was the case with the auto bailout, which he also threatened to filibuster, the numbers in the Senate just aren't working for him. He also might have sensed over the last 24 hours that the stimulus bill is politically popular, because he backed off the word "filibuster" in his conversation with CNBC, saying only that "I would certainly extend the debate as long as we could to get the attention of the opposite side."
Shelby said he wants to "shelve" the existing bill and "start all over and look at it in a bipartisan way." But all that means is that he wants the bill to be written as if the Republicans were still in power, ladling out tax cuts to all and sundry. Meanwhile, he says the real focus should be on fixing the bank system.
What will turn the economy around is us finding some solution to the financial frozen assets and banks not making loans because that's what will create jobs.
But as the interviewer astutely noted, that's precisely what the Troubled Assets Relief Program (TARP), currently being rejiggered by the Obama team, is for. And Shelby voted against TARP -- even though the initiative was cooked up by his own party. I guess when the choice is between bailing out banks, and bailing out the general public, the Republican option is a no-brainer: help the rich!
But even on TARP, Shelby made no sense. The interviewer asked him what kind of Wall Street rescue plan he would vote for:
Well, I'd have to see it. But what I would do is something that's well thought out, that would bring in the government and private money to get a lot of these bad assets, not let the banks make a lot of money off of the taxpayer, but to get our banking system moving ...
We have to do it right. They've got to price those assets right. Some of them are trying to do it by models. A lot of these models don't work. We need to price it by the market.
Democrats and Republicans, left-wing and right-wing economists, pretty much everyone agrees -- the problem of how to price the toxic assets held by banks is proving hugely difficult to solve. If the government purchases these assets from banks at a high enough price so that the banks don't lose billions of dollars on the deal, then taxpayers are left subsidizing Wall Street's recklessness, and shareholders in the banks emerge relatively unscathed. But if the assets are valued at what "the market" is willing to pay, then the banks are screwed, because the market doesn't want to pay squat for busted mortgage-backed collateralized debt obligations. They're called "toxic" for a reason.
At one point, Shelby reached an embarrassing height of plaintive whining:
What I fear is that there will be more than one or two Republicans who will jump ship. I hope that won't happen. I wish we would hold on -- hold together like the House did and we could make a difference in this bill and make a difference for America.
The House Republicans held together because the House Republicans have no power and nothing to lose. But the Senate Republicans have a lot to lose. Filibustering the stimulus plan right now while focusing exclusively on Wall Street is a recipe for political disaster, as any Republican senator up for reelection in 2010 must be keenly aware.
Shelby must be enormously frustrated. His party is out of power, and he knows that enough Republican senators are taking their jobs responsibly that the tried and true filibuster threat carries little weight. But even if his party were in power Shelby still wouldn't be able to articulate a coherent strategy, except to ask for more tax cuts, and make vague statements about "a well thought out" plan that would allow "the market" to solve its own problems. Except: The market was largely responsible for causing the current financial crisis, and government action offers the only way out.