Monday, October 13, 2008

Mike Conaway Blames Individual Depositor Scared by Cornyn

The Senate passed the Wall Street bailout bill, after the House initially nixed it. Rep. Mike Conaway ignored the will of his West Texas constituents by voting for the Senate version of the bill. Senator John Cornyn (R-TX) explained his vote in an October 1 press release. It stated:

A widespread financial collapse will have a domino effect throughout our State. It might begin on Wall Street but it will ultimately hit Texas families and small businesses the hardest. This is not a theory or hyperbole or a scare tactic. It is a fact.

Rep. Mike Conaway accused those individual bank depositors of compounding the credit crisis. He said the following about those Nervous Nellies to America's Business Radio:

"I lobbied along with a lot of my friends to increase the FDIC (Federal Deposit Insurance Corporation) insurance limit for banks and savings and loans and credit unions from $100,000 a borrower to $250,000 a borrower. That's a confidence builder. And what we're talking about is confidence in these bank officials to continue to do what they do on every single day. And if we calm down the individual depositors, help calm down some of the small businesses who might have more than $100,000 in the bank and quit moving that money around unnecessarily because they are trying to avoid being in an uninsured position, then that's kind of a little oil on the water itself."

People weren't moving money around when Hank Paulson rang the alarm bell the week of September 18th. The big money boys quit lending to each other at reasonable rates. Credit default coverage rose dramatically. Wall Street didn't trust their peers to make good on their debt. Loan rates reached "pay day loan" level for investment houses.

Representative Conaway voted against the bailout bill, before he voted for it. He angered many of his constituents and is in the midst of a "Forgive Mike" tour. His district rounding is actually called "Ask Mike Anything." But that doesn't mean he'll answer your question. At a San Angelo Open House last year, Mike took my question, pivoted and "answered the question he wished I'd asked." Yes, those were his actual words! But Mike did talk to Bloomberg about his vote. They reported:

"Credit is the lubricant that oils the engine of the economy'' and if it dries up, "then the engine seizes up,'' said Republican Representative Michael Conaway of Texas, who switched his vote last week to support the financial rescue. The inability of a major corporation to renew its short-term loans would have "a devastating impact on the economy.''

Note no mention of individual depositors on October 5th. It's big companies and their short term loans. What happened since Mike switched his vote to free up lending?

Credit froze up more. Morgan Stanley credit default swaps his $2.5 million for a year's coverage on $10 million in debt. That's nearly 3 times the $900,000 on September 18, the day Hank Paulson hit the panic button.

The demands from big money boys kept coming. Will they stop if they get guaranteed interbank lending? A financial expert on CNBC said 50 of the right people in a room could unfreeze credit overnight. The big money men don't trust each other to pay on their debts. Uncle Sam's promise to pick up the tab (to the tune of $3 trillion) made no difference to date.

While stock exchanges are up today, credit markets are closed. Bankrupt Lehman Brother's credit default swaps settle up next week. That will say boatloads. Will the big money boys stand behind their risky financial bets? Or will they slough it off on taxpayers via a just ramped up toxic assets buyback program?

Whatever the answer, I don't expect to hear it from certified public accountant, Rep. Mike Conaway.

"My job as I see it is to form the best opinion I can, the most informed, intelligent,” Conaway says.

It's a shame Mike isn't passing that information on to voters. Does he think we can't handle the truth?

If only he'd host a session titled "Mike Will Answer Everything." That, I'd attend.