And that is a good thing, in my opinion.
A high-profile White House meeting on Treasury’s $700 billion Wall Street rescue plan ended on a sour, contentious note Thursday after animated exchanges among lawmakers laced with presidential politics just weeks before the November elections.
Treasury Secretary Henry Paulson came up to the Capitol hours later to revive talks, but House Republicans did not participate, and Democrats warned that the whole process could collapse unless President Bush gets them to come to the table.
“Unless this fourth leg shows up at some point, this could fall off very quickly,” said Senate Banking Committee Chairman Christopher Dodd (D-Conn.).
I am personally not convinced that a bail out is necessary at this point. I am also pretty damned sure that the Paulson/Bernanke bailout is a bad plan. Not only does it now appear that the plan is based on little or no sound analysis, but also just the way the plan will work is bad as well. Basically going around to financial institutions and buying up their toxic assets strikes me as a way to waste $700 billion. The problem with the toxic assets is that nobody knows exactly how much they are worth. The people who would buy them don’t want to buy them at the price the banks want to sell them for. Thus, if the government buys them and the banks willingly sell them it is pretty much a given that the U.S. government is paying too much for them.
And what is the point of such a bailout? To prevent a massive credit crunch that could virtually paralyze the U.S. economy and likely the rest of the world’s economy as well. I’ve joking posted about just adding $700 billion to money supply…which the more I think about it is probably the better idea. Sure you might be thinking, “Why that is inflationary!” Hello, think McFly. What do you think credit is? Deflationary? In fact, this is precisely the policy the government finally pursued during the Great Depression. By not going of the Gold Standard right away it contracted the money supply leading to deflation. Countries that went off the Gold Standard started growing again.
One could argue that we are not in a recession let alone a depression. I could then respond that preventing such a thing is a good idea. In fact, I’m coming around more and more to the idea of just pumping another $700 billion into the economy. Can’t be worse than the Paulson “plan”.
