Updated: May 3, 2013 12:14PM
The financial markets held their collective breath on Wednesday, waiting to see the details of a financial rescue plan now under great debate by both Congress and the American public.
The Dow Jones industrial average traded in a narrow range for most of the day, closing with a loss of 29 points, while the Nasdaq eked out a 2-point gain. Crude oil closed at $105.73 a barrel, and gold at $895 an ounce, while short-term interest rates held steady.
Then Standard & Poor's downgraded its credit rating on the debt of Washington Mutual further into junk territory. That's an ironic move, considering S&P was one of the rating agencies that gave subprime mortgage packages investment grade ratings over the past two years. But it was a solemn reminder that these days the rating firms are taking a more skeptical view of debt and its possible repayment.
Meanwhile, Treasury Secretary Paulson and Federal Reserve Chairman Bernanke continued to make their case that an immediate bailout of the financial services sector should be enacted by Congress. But reacting to public outrage that taxpayers should be asked to pay for the mistakes of Wall Streeters, concessions to the Paulson plan were demanded by representatives of both parties.
Late in the day it was reported that Paulson had agreed to accept some conditions for the bailout, including a cap on the pay of executives of failed companies.
What the public doesn't yet comprehend in the midst of the emotion is that the bailout is not for the Wall Street crowd, but for all Americans who stand to lose if the economy plunges into a recession, with high unemployment, and a collapsing stock market that will impact everyone's retirement plans.
The situation quickly became enveloped in presidential politics, and President Bush took to the airwaves on Wednesday night to address the crisis.
Perhaps the most convincing argument was made by legendary investor Warren Buffett, who agreed to buy $5 billion worth of stock in Goldman Sachs, and potentially double that amount in the future, based on his belief that a bailout would be enacted.
Buffett predicted a dire result if Congress doesn't act, comparing it to a "financial Pearl Harbor." Certainly, Buffett wasn't playing politics, and he was deadly serious.
If Congress wants to delay and debate, then they -- and all of us -- are likely to have a firsthand lesson in just what Buffett means as the financial crisis spreads throughout the economy. That's the Savage Truth.
Terry Savage is a registered investment adviser. Distributed by Creators Syndicate. Copyright Terry Savage Productions Ltd.