Lombard Street Research agrees with me (via Barrons):
U.S. CONGRESS STRUCK A BLOW FOR FREEDOM yesterday, giving the lie to its critics on Wall Street and the administration, who have shown a far weaker grasp of principle.
My colleague Brian Reading argued for a buyout rather than a bailout a few days ago, and that seems to be what is happening. The disposal of problems by existing well-tried systems is adequate to the situation, e.g., the U.S. Federal Deposit Insurance Corp. with Citigroup (ticker: C)/ Wachovia (WB) and JPMorgan Chase (JPM)/ Washington Mutual (WM).
They also make the point that maybe an economy that has overdosed on credit doesn’t need anymore right now:
No more loans? Oh dear! Maybe, in a crisis caused by grossly excessive private-sector debt loads, that is exactly what is needed. It reminds one of our own Tony Blair blathering on about the need for new laws to curb terrorism, while his then Chancellor, Gordon Brown, was busily restraining funds for the police and the Courts.
They also believe the panic is overblown:
Huge problems are already overdiscounted, including the fact that Americans will not only not be borrowing for a while, but actually spending less than their income. It’s called saving. Maybe we will have a recession. Nobody has actually forecast one any worse than 1990’s — compared to 1980-1982 or 1974-1975 this is minor, as is the market disruption. And comparisons with the 1930s are ridiculous.
It is true that Messrs. [Treasury Secretary Henry] Paulson and [Federal Reserve Chairman Ben] Bernanke are part of the problem, with their gross neglect of contingency planning followed by attempted blackmail of the Congress. But even if they have not (yet) done the decent thing and resigned, stocks are probably close to the bottom of this downcycle.
I have argued for months that this is not as big a deal as everyone is making it out to be. The housing bubble was confined mostly to Florida, California and Nevada. There is no reason why popping a localized bubble should bring down the entire banking system, much less the whole economy.