The failure to pass a work-out plan, based on Republican votes, has begun a grieving process on Wall Street similar to what Clintonites went through this spring.
Denial was the order of today. This was especially the case with Republican reporters like Charlie Gasparino (right) and the traders being interviewed throughout the afternoon. None could believe that the Republican Party they had sunk their political souls (and fortunes) into could be turning them down.
Anger, bargaining and depression are the next stages of the process, and these will come quickly as the week wears on. (Acceptance comes on the morning of November 5.)
Treasury Secretary Hank Paulson delivered a veiled threat from the White House, saying he would work with "anyone" to get a package through Congress. That means if Nancy Pelosi and Barney Frank can come up with some price that will draw 11-15 more votes, Paulson will sign on and provide them the political cover. (Even Republican Senator Judd Gregg was repeating Democratic talking points this afternoon as he pleaded for more votes.)
Meanwhile Wall Street was reacting as expected, falling 777 points (nice number that) on light volume. Everything was taken out and shot — even Google. The interest rate on 3-month treasuries fell to .17%, practically nothing, because people who have money to invest are scared to death. Banks are refusing to lend to one another, and business lines of credit for things like salaries are already being cut-off.
Of all the CNBC talent, Steve Liesman is
closest to turning, as when another reporter asked "where are the
leaders," answering "the other party." Credit market reporter Rick
Santelli, meanwhile, was saying "the Bonfire of the Vanities
calls it crumbs," alluding to the view in Tom Wolfe’s novel that
bankers only take crumbs from the financial table everyone else dines
In this way the reporters are ahead of the traders. Democrats have an
historic opportunity to craft a bill they like, to pass it over
Republican objections, and to take the credit from a grateful financial
sector. Many in the party won’t like that idea — they’re too
accustomed to seeing financiers as enemies — but that’s how old
coalitions fall and new ones are born.