Yet more commentary on the economics and politics of the financial crisis. Noah Millman:
The temptation for Congress is going to be to horse-trade, to try to get homeowner relief tacked on to Wall Street relief basically, to give the Treasury what it wants and ask for some other goodies in exchange. This temptation has to be resisted. The urgent thing is to get the bailout itself right, and not to agree to something foolish and dangerous because of panic.
This is a black week. Those of us who have supported financial capitalism are open to the charge that the system we championed has merely enabled a few spivs to get rich. But it helped produce healthy economic growth and low inflation for a generation. It would take a very big recession indeed to wipe out those gains. Do not forget that in the debate ahead.
Critics would charge that in opposing the bailout, in standing against an apparent bipartisan consensus, McCain was being irresponsible.
Or would this be an act of responsibility and courage?
Mr. Paulson insists that he wants a “clean” plan. “Clean,” in this context, means a taxpayer-financed bailout with no strings attached no quid pro quo on the part of those being bailed out. Why is that a good thing? Add to this the fact that Mr. Paulson is also demanding dictatorial authority, plus immunity from review “by any court of law or any administrative agency,” and this adds up to an unacceptable proposal.
I'm a little reluctant to second-guess the proposal put together by Bernanke and Paulson because I don't know everything the Fed knows about the fragility of the credit markets and the urgency of the case...It will be interesting to see whether Congress insists on a debate of these and other alternative strategies, or concentrates merely on larding the Paulson-Bernanke approach with additional subsidies for distressed home-buyers.
Even if Hank Paulson were the all knowing god of economics, would it make sense to give this kind of power to the treasury secretary for the next two years just forty days before an election? Shall we go through our mental list of who an Obama administration (or a McCain administration for that matter) is likely to put in that post? And doesn’t it make sense to establish some kind of process for deciding how specifically to use the money? To put in place some criteria of prioritization? Some real-time oversight? Isn’t transparency crucial to the proper functioning of our modern financial system? And how is everyone in both parties suddenly satisfied that this approach is the only one that could work?
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