No deal
That seems to be the consensus opinion of the leaked $700 billion rescue bill tonight.
Krugman:
The Treasury plan, by contrast, looks like an attempt to restore confidence in the financial system — that is, convince creditors of troubled institutions that everything’s OK — simply by buying assets off these institutions. This will only work if the prices Treasury pays are much higher than current market prices; that, in turn, can only be true either if this is mainly a liquidity problem — which seems doubtful — or if Treasury is going to be paying a huge premium, in effect throwing taxpayers’ money at the financial world.
And there’s no quid pro quo here — nothing that gives taxpayers a stake in the upside, nothing that ensures that the money is used to stabilize the system rather than reward the undeserving.
I hope I’m wrong about this. But let me say it again: Treasury needs to explain why this is supposed to work — not try to panic Congress into giving it a blank check. Otherwise, no deal.
There’s no “what happens next” in the plan…no exit strategy, to borrow a phrase from another Bush debacle.
This should not turn into a political issue. That said, if the Republicans and their lobbyist allies are demanding a blank check with zero reforms, I think the Dems should put their feet down and say no. Then take it to the voters. What better time? Simply tell the voters what the administration is trying to make them do and let them decide.
Unfortunately, the Democrats are afraid of such a maneuver, which is why this will be a done deal by this time tomorrow. If they would simply trust the voters, I think they’d be pleasantly surprised.
