Here are some thoughts about the defeat of the Wall Street bailout.

• I’m wondering what’s next. A large group of economists has written an open letter criticizing the bailout plan and saying it ought not to be enacted without serious debate and modification; though none of these, apparently, believes there is no crisis in the country. On its face, even as amended, the proposal seems to be a typical Bush power grab that the administration is trying to stampede the congress into approving without a fair debate.
• I’m thinking the proposal is bad on the merits. The oversight provision puts in charge the same people who created the crisis in the first place. The limits on executive compensation leave in place all agreements presently in existence. The limits on how much of the $700 billion can be spent allow the President and the Secretary of the Treasury far too much discretion. And the proposal contains no provision to help struggling middle and working class people beyond suggesting a sort of noblesse oblige on the part of the Treasury Secretary.
• Perhaps the proposal’s defeat might be an opportunity for Congress to draft a better proposal, though I can’t imagine this coming about in the present political climate, or with this President. Perhaps Congress might make the cosmetic limits and restraints on executive authority into real limits — the President can’t veto this thing, after all — but I don’t see that happening.
• I’m thinking the congressional negotiators gave the President too much, but maybe what they settled for was the best they could do, and maybe the bailout needs to be passed given the gravity of the present crisis. The problem all along has been getting enough Republican votes to pass it as a bipartisan measure, though that seems very unlikely now.

As Paul Krugman sums up the impasse:

. . . [W]hat we now have is non-functional government in the face of a major crisis, because Congress includes a quorum of crazies and nobody trusts the White House an inch.