To function, our economy requires a free flow of capital. Various mechanisms permit capital to flow, including banks lending to each other, banks lending to individuals, individuals investing in corporations, corporations investing in innovation. In a modern economy these mechanisms rely heavily on something quite intangible: trust. When loans are made lenders have to trust that borrowers will be around to repay them (whether the borrower is a homeowner or a bank. Similarly, when a person or a company places money in a bank or uses it to purchase equity (stock or some other ownership interest), that person or company must trust that that the bank will not fail and that asset has sufficient value to be worth buying.
In the current economic climate, consumers do not trust banks, banks do not trust each other, investors do not trust that available equity interests have the worth they are represented as having and they do not trust that these interests will hold whatever current value they do have.
This is why central banks around the world are being asked to or affirmatively trying to step in as lenders - suppliers of capital.
Meanwhile the U.S. Congress, led by Nancy Pelosi and Harry Reid, are attempting to pass legislation that vouches for the different players in the financial world so that some level of trust will be restored. Their problem is that they think that vouching for these institutions means giving them lots of money.But nobody trusts a bill that gives money directly to institutions nobody trusts. (I realize the gift is being put in the form of "buying distressed assets" but the government is prepared to overpay wildly for these assets; the gift is the difference between the assets' true worth (unknown) and the price the government plans to pay (to be determined by a complicated reverse auction process.))
And people who followed the Democratic Party convention closely certainly have no reason to trust anything Nancy Pelosi says or does or anybody she endorses, including her preferred presidential candidate, Senator Obama. At the Convention, Speaker Pelosi played a major role in abandoning Party rules and coercing delegates into a rigged process to produce the Obama nomination. So it comes as no surprise to see her willing to change rules for special interests she apparently favors, to promote a bailout for large banks who speculated with depositors' money. That's the Pelosi way.
I am not urging that the government take no steps to stabilize the credit markets. Nor am I suggesting that only Speaker Pelosi and Senator Reid are solely responsible for the bill, which was originally put forth from the White House. But the House of Representatives has consitutional responsibility for appropriations, and a spending bill that has the the support of the Speaker is the Speaker's responsibility. Sure, Speaker Pelosi can say she's holding her nose while voting for the bill. That would be in keeping with what she's asking millions of voters to do on November 4 on behalf of her preferred candidate.