World stock indices across Europe and the Asia-Pacific region dropped Friday on news that discussions underway in Washington, DC to provide government funds to support the American financial structure had splintered into partisan bickering.
The Hang Seng (Fri 09:33) dropped over one percent, down 1.33% in Hong Kong, while the Sydney All Ordinaries (Fri 07:25) lost over three-fourths of a percent, down -0.83, and Japan's Nikkei (Fri 08:14) stalled at -0.94 percent.
Stock markets throughout Europe followed suit from Frankfurt (DAX -1.94%) and Amsterdam (AEX -2.37%) to Paris (CAC 40 -2.04%), Brussels (BEL 20 -2.71%), Zurich (SMI -1.99%), and London (FTSE 100 -1.89%).
In another troubling indicator of US economic weakness and American financial instability, federal regulators seized the nation's largest savings-and-loan bank, Seattle-based Washington Mutual, late Thursday night and sold it to financial services firm JP Morgan Chase for $1.9 billion. Credit markets remain nearly frozen.
Following mid to late week efforts on behalf of US government officials to broker a bipartisan deal to provide a pool of federal funds to buy up toxic corporate assets linked to the American housing crisis there was widespread anticipation that a rescue package was imminent by week's end.
The initial proposal put forth by US Treasury Secretary Henry M. Paulson, Jr. last Thursday evening, September 18, 2008, in a meeting with the bipartisan leadership of the United States Congress appeared to falter Wednesday leading into Thursday.
Paulson, who together with Federal Reserve Chair Ben Bernanke and SEC Chair Christopher Cox, all Republican appointees, had been hopping around smothering financial fires since March, 2008 with the government sponsored deal to save investment giant Bear Stearns.
US President George W. Bush has repeatedly proclaimed the United States economy "structurally sound" until just days ago. On Tuesday, September 16, 2008, the day after what Robert Peston of the British Broadcasting Corporation (BBC) called "Meltdown Monday," US Republican presidential candidate, Senator John McCain (R-AZ) claimed the American economy was "fundamentally sound."
In an abrupt about face McCain attempted to clarify his untoward remarks within hours saying his comments were aimed at American "workers" who "have always been the strength of our economy, and they remain the strength of our economy today."
Also on September 16th, McCain economic advisor Carly Fiorina, former Hewlitt-Packard CEO, in separate comments first in St. Louis and later to MSNBC, pronounced that neither Senator McCain nor his running mate, Governor Sarah Palin (R-AK) were qualified to run a big US corporation.
That comment prompted McCain to angrily bury Fiorina in his campaign organization vowing to never let her speak to the press for the duration of the US presidential campaign.
When the US Treasury announced the Paulson Plan late last week, McCain called for bipartisan agreement on a rescue proposal, railing against Washington and Wall Street, and attempted to champion Main Street interests.
As McCain continued campaigning last weekend and throughout this week, Congressional leaders from both parties tweaked the three page Treasury proposal to prevent golden parachutes for CEOs whose companies participated in the taxpayer bailout, established a mechanism for the orderly disposition of illiquid assets, and defined oversight and regulatory functions to shore up an opaque financial services sector lacking accountability and transparency.
Although President Bush seemed to be playing a strangely distant, behind-the-scenes role in what amounts to the largest US government intervention in the private sector in American history, on Wednesday evening, the President addressed US citizens during a prime-time televised speech from the White House.
Bush told the country: "We're in the midst of a serious financial crisis, and the federal government is responding with decisive action."
By the time Bush spoke to the American people on Wednesday night, bipartisan congressional leaders had already by Tuesday reached broad agreement on the structure of any so-called bailout.
Hopes for a legislative remedy were strained Wednesday, September 24th, with the inexplicable announcement by McCain that he was suspending his presidential campaign to return to Capitol Hill and canceling a long awaited scheduled debate with the Democratic candidate, US Senator Barack Obama (D-IL) on Friday at the University of Mississippi.
It remains unclear what exactly McCain's presence in Washington was calculated to achieve: legislative negotiators had made substantive progress on crafting an acceptable bill until the near simultaneous announcements by the White House and the McCain campaign on Wednesday afternoon.
On Thursday afternoon the leadership of Congress, Bush, McCain, and Obama met at the White House to reach some consensus on finalizing the financial bailout legislation. Instead the GOP leadership essentially walked out of discussions claiming to never have supported the Republican White House proposal from its inception.
The DJIA, NASDAQ, and S&P 500 indices were all down on the open going into Friday morning trading.
McCain has not decided if he will attend tonight's presidential debate at Ole Miss apparently opting to stay in Washington to further muddle the legislative waters by injecting presidential politics into the lawmaking process.
McCain a twenty-five year Washington insider, having served in the US Congress since 1983, was implicated for his involvement in the Keating Five incident surrounding the savings-and-loan crisis in the late 1980s and early 1990s. Although rebuked for exercising poor judgement in the Keating matter by the Senate Ethics Committee, McCain was not charged with criminal wrongdoing.
McCain himself noted about his involvement in the Keating Five: "The appearance of it was wrong. It's a wrong appearance when a group of senators appear in a meeting with a group of regulators, because it conveys the impression of undue and improper influence. And it was the wrong thing to do."
It is unclear what McCain learned from his involvement in the savings-and-loan scandal and what lessons from that crisis he is applying to today's broader financial meltdown. McCain's cancelation of his participation in tonight's televised debate diminishes the public's opportunity to hear his answer to that question on the very same day that Washington Mutual, the country's largest savings-and-loan, has failed.