Bailout? Version II

Just spotted this:

Wall Street Journal, September 29, 2008, 2:01 A.M. ET

Lawmakers Reach Tentative Bailout Deal

Top U.S. policy makers emerged from hours of tense negotiations with a clear message just after midnight Sunday morning: A deal to bailout U.S. financial markets has been agreed on and all that remains to be done is to commit the legislation to paper.

Treasury Secretary Henry Paulson, House Speaker Nancy Pelosi (D., Calif.), and Senate Majority Leader Harry Reid (D.), were flanked by key negotiators in the Capitol as they announced that a $700 billion plan to have Treasury buy up toxic assets had been all but finalized after hours of exhausting negotiations. "I think we're there," an exhausted Mr. Paulson said, a sentiment echoed in the statements of negotiators such as House Financial Services Chairman Barney Frank (D., Mass.) and Senate Banking Committee head Christopher Dodd (D., Conn.)

And for the Republicans:

"We worked out everything," said Sen. Judd Gregg, the chief Senate Republican in the talks. He said the House should be able to vote on it Sunday, and the Senate could take it up Monday.

Pretty solid, and...

House Minority Whip Roy Blunt (R., Mo.) said that he planned to talk to colleagues and get reactions.

Maybe not so much.

And no Boehnor, Shelby, or Cantor. I think the Democrats may be taking a bow again, and applauding themselves. I don't see a lot that will particularly excite Republicans --the insurance idea for example seems to be nothing more than a verbal acknowledgment of concept. But then, nothing has been written down, so we'll see. They've probably just decided to muscle it through. The announcement now is for the Sunday TV shows.

Republicans might as well let them ride with it. If it's a successful program it's good for the country, if it's a disaster it's good for Republicans. I can't see any point in voting for it.

And I can't see why any of this should have been so "exhausting". It pretty much seems to me they've been talking to themselves.

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8:50PM PM

I've remained in a good mood today by not paying any attention to the news at all. I did just check and found this at Hot Air:

A source close to House Republicans has put out a Myth vs Fact rundown of the bailout compromise, announced early this morning....

Myth: Treasury plan is the only option available.

Fact: Treasury is given multiple options to deal with the current economic crisis, including insurance, public/private auctions, loan guarantees, and direct support to financial institutions.

Fact: Further, Treasury is MANDATED to create an insurance program (Section102) that protects the taxpayers and requires companies that wish to participate in this program to have some skin in the game by paying risk-based premiums.

I guess that's the only one I particularly care about. But while the written version is apparently now up, I haven't seen it, so I don't know if "mandated" actually means mandated. To my mind this is an exceptionally intelligent proposal --all that's really needed to restart the financial markets is to break the freeze, insurance would do that-- but if it's "mandated" but not pursued, it might be the same as if it didn't exist. --Otherwise, the only money immediately available to Paulson is 250 billion, and 100 billion more simply on the President's affirmation that it's necessary. Is it possible that that not being enough, Paulson would have to try the insurance option...? Which wouldn't cost a dime. --It also seems to me that temporary unlimited FDIC deposit insurance would prevent runs on banks and money markets, and that should unfreeze assets for lending.

Whatever, at least it's not unlimited power given to one man, and that somewhat maintains the idea of republican government. --Still think this is mostly hysteria. Apparently passage won't happen before Wednesday --the House Monday, the Senate Wednesday. It will be interesting to see if markets calm just on the thought "something will be done". Friday the Dow went up 121 points.

Apparently most of the Republican leadership is backing the bill, though again, that statement of backing has come before they've seen the actual written language.

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I rather like this guy's attitude:

If the bailout doesn’t work, we will see further declines in the stock market and asset value than if we did nothing — so what ever they propose better be bullet-proof. Personally, I don’t have a lot of confidence in the Congress, Treasury, and Federal Reserve to cobble together a cohesive plan that covers all the bases.

With elections on the line, there is too much temptation to play politics and not do what is right for the market.

But still — perhaps the right thing to do would have been to listen to the lessons of Adam Smith and Milton Friedman and let the capitalistic market work.

Fundamentally my feeling. Maybe a lot of FDIC, but otherwise take a lot of time and do something bright and not political. And do it when the dimensions of the problem are clear. The only huge dimension of the problem just now is hysteria.