As we said when the idea of this bill was first mooted, bye bye US AAA rating, bye bye dollar. Not overnight, but the die is cast.
We have also said that the eagerness to pass this measure is based on the faulty premise that this package will actually do something to solve the problem. It won’t.
Trying to prop up assets at above market levels is DESTINED to fail, and worse, only digs us deeper in the debt hole in the process, making the ultimate resolution of our economic mess even more costly and painful
We are not alone in this view. Virtually no economist is in favor of the program (save Alan Blinder). University of Chicago even published an open letter with a long list of signatories against it. And commentary on econoblogs has been as close to unanimity as one sees in these parts against. it.
All it will do is provide a short-lived burst of confidence, then as market participants think through its operation and ramifications, the anxiety and stressed conditions will return. How long will the false euphoria last? Two weeks to six weeks, I’d hazard.
And worse, the existence of this program will block any other course of action being taken. It is so large and resource-intensive an approach that it precludes other remedies.
Democratic Rep. Barney Frank said on Wednesday Democrats had reached an agreement to stem one of the worst U.S. financial disasters in decades, and that there would be enough votes to pass the measure and send it to President George W. Bush to sign into law.
“We now have between House and Senate Democrats an agreement on what we think should be in the bill, and we have a meeting scheduled at 10 a.m. tomorrow to meet with the Republicans,” said Frank, chairman of the House of Representatives Financial Services Committee.
Proponents of a rescue plan have expressed hope that a bill could be delivered to Bush within days.
While the Bush administration had asked Congress for $700 billion for an unprecedented Wall Street bailout, Frank said that amount might not be delivered all at once.
“One tranche doesn’t work,” he said, adding that “safeguards” were needed.
Frank said there would be tough congressional oversight of as well as limits on compensation packages for executives of companies that receive federal relief.
The Massachusetts senator said a limited number of details still had to be resolved, but thought it could be done quickly. These matters involved bankruptcy protections for families on the verge of losing their homes and giving the government a return on its money if the company being helped prospers.
Frank took a dig at Republican presidential nominee John McCain, who interrupted his campaign to return to Washington on Thursday to help work on a Wall Street bailout.
“All of sudden, now that we are on the verge of making a deal, John McCain here drops himself in to help us make a deal, Frank said.
He expressed fear that McCain, a U.S. senator from Arizona who has spent much of the year away from the Capitol campaigning, could end up slowing down work on the bill.
The Massachusetts Democrat noted that a meeting on Capitol Hill on Thursday will be interrupted for a “photo op” at the White House with congressional Democrats and Republicans as well as Bush.
“We’re trying to rescue the economy, not the McCain campaign,” Frank said….
The issue of government controls on compensation for executives of corporations that participate in the bailout had ignited a firestorm, with Americans complaining to their representatives in Congress that these corporate chiefs shouldn’t be rewarded for failure.
“On the executive compensation thing, it went to the core of their (the Bush administration’s) being,” said Frank. “It was like asking the chief rabbi of Jerusalem to eat bacon on Yom Kippur. It was the most unthinkable thing they could think of.”