MOSCOW. (RIA Novosti political commentator Andrei Fedyashin) - After the shocking failure of the financial stabilization package proposed by the U.S. administration in Congress on September 29, the American financial crisis has started spreading like a tsunami.
The first to have been hit by it was Wall Street; the next day the wave reached the Asian and European exchanges.
The bailout package, called Emergency Economic Stabilization Act of 2008, stipulated the allocation of $700 billion for purchases and insurance of troubled bank assets.
The United States will still have to do something to prevent clots in the country's financial veins, and do it quick.
This is why President George W. Bush spent the night in consultation with Treasury Secretary Henry Paulson and Federal Reserve chief Ben Bernanke preparing for an address to the nation on a new financial stabilization plan in the morning of September 30.
Negative votes in Congress were one more, and probably the last, humiliation for President Bush. Two-thirds of the Republicans voted against the bailout bill in the House of Representatives, many more than the number of Democrats who voted for it. As the November 4 presidential elections approach, Republicans have apparently decided to jump Bush's sinking ship.
But this will not save them from election troubles, because they will have to approve a stabilization plan, whether they want to or not. The problem will not disappear of its own free will. There are too many clots in the banking arteries, a result of years of eating very rich and unhealthy food.
The package will be reviewed, modified, and probably streamlined and divided into several tranches, and will possibly add more guarantees safeguarding the repayment of a large part of the public's investment, or possibly stipulate state involvement in revenues.
In principle, the proposed allocations can be cut, although not much (if at all), because the advanced stage of illness calls for using potent medicine. The pill may be bitter, but the American economy will have to swallow it because the disease, as Europe describes the American crisis, has reached the Old World.
European governments, from Iceland to Italy, are injecting money into their banks and markets, trying to prevent dehydration and hangover after the riotous American party at which Europe did not drink too much anyway.
Germany's Bundesbank has allocated 71 billion euros to support mortgage companies and banks.
The Bank of England has injected ?40 billion in the form of short-term bank loans into the market. Her Majesty's Cabinet has taken the unprecedented decision to nationalize the country's largest mortgage bank, Bradford & Bingley.
The governments of Belgium, the Netherlands and Luxembourg have chipped in to allocate 11.2 billion euros to solve the problem through partial nationalization of Fortis, Benelux's largest bank.
The Icelandic government has nationalized the country's biggest bank, Glitnir, to prevent a financial catastrophe. The homeland of the Icelandic herring has recently been drinking champagne on a beer budget, operating "like one big toxic hedge fund," as one commentator quoted by The Telegraph said. The Icelandic krona has plummeted by 60% since the beginning of this year.
The first shock from Congress's decision has thoroughly shaken up world exchanges. The British pound almost lost consciousness waiting for Congress to approve the $700-billion bailout bill. British market dealers, convinced that Bush would have his way, started selling the pound and buying the dollar, thereby pushing the British currency to the lowest level since 1993. Thank God, the shock wore off by the end of the day.
In the States, developments have taken a completely unpredictable turn, and not only in Congress. Eleven large commercial banks have filed for bankruptcy and this is only the beginning. The U.S. market is falling into incredible somersaults, as seen from the example below.
About two weeks ago, Wachovia Corp., the country's fourth largest banking group, was seen as the potential buyer and saver of Morgan Stanley, the second largest investment bank. But it transpired in the last few days of September that Wachovia has been bought by Citigroup.
The crisis wave, which originated in the U.S., is spreading across the planet and nobody knows when or where it will stop.
Congress will most likely vote for the new plan this or early next week. It has been known to first register a protest (to strengthen congressmen's reputation) and then approve a bill after shallow changes.
Republican candidate John McCain will suffer the most from this, because Bush has put him under such a heavy cloud that he can forget about his plans for the White House. But then, who has it easy these days?
President Bush is suffering too. Sen. Jim Bunning, R-Ky., said the bailout is "financial socialism and it's un-American."
Nouriel Roubini, the New York University economics professor, says worse is to come. He said: "Comrades Bush and Paulson and Bernanke will rightly pass to the history books as a troika of Bolsheviks who turned the USA into the USSRA (United Socialist State Republic of America)."
This highly critical statement was apparently made in the heat of the moment, but this knowledge will not make Bush's life easier. He has been accused of being a Bolshevik, not even an unpatriotic socialist. On the other hand, there are reasons for the professor's words.
The non-partisan Cato Institute headquartered in Washington, which has been advocating "the traditional American principles of limited government, individual liberty, free markets, and peace" for the past 30 years, has recently published the results of a survey claiming that in 2006 the U.S. administration allocated $93 billion to the largest American industrial, banking and agricultural companies in the form of subsidies, tax benefits, financing of various "development projects" and competitiveness support.
Maybe "friend George" is indeed a Bolshevik who wants to destroy the American economy down to the rock bottom, so as to be able to begin from scratch?
The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.