What's the Hurry?
The administration is pushing for a decision on their trillion dollar bailout by the end of the week. (Who actually believes the bailout would be limited to 700 billion?)
But why the rush?
It seems inconceivable that anyone could spend a trillion dollars in the time left to the Bush administration. This is like one of those stories where someone has to spend a million dollars before they can inherit a fortune.
If the bailout is going to be conducted in any sort of responsible fashion, it will take some time. We have all of these securities which have been sliced and diced. But how do we value them?
At some point they have to be unsliced and diced. That means the various properties which underly each fund will have to be identified and valued. Also, it will be necessary to determine which properties have been foreclosed upon, which ones are in default and which one are problematic.
This will take a fairly extensive review of the public records, including the property tax assessments and payment histories concerning the properties. This will take time and considerable man hours. To do otherwise is to buy a pig in a poke.
Moreover, as a negotiating tactic, it makes no sense to give the administration a blank check to negotiate. We all know this. When we buy a car, the salesman always has to chat with the sales manager (to discuss football scores) as part of the standard negotiation. That Paulson will have to come back to Congress for approval of each contract only strengthens the government's ability to negotiate.
In fact, the best course of action would be to have the Treasury Department bring each bailout proposal to Congress to be voted on. There is no reason to agree to a final number at this time. Simply pay as you go.
Moreover, it makes little sense to approve a plan that the next President will not buy into. Obama has already said that the current plan is not acceptable, and McCain has remained silent. One of these two guys is going to end up administering this plan, and if neither is firmly on board, it is a waste of time and money.
But why the rush?
It seems inconceivable that anyone could spend a trillion dollars in the time left to the Bush administration. This is like one of those stories where someone has to spend a million dollars before they can inherit a fortune.
If the bailout is going to be conducted in any sort of responsible fashion, it will take some time. We have all of these securities which have been sliced and diced. But how do we value them?
At some point they have to be unsliced and diced. That means the various properties which underly each fund will have to be identified and valued. Also, it will be necessary to determine which properties have been foreclosed upon, which ones are in default and which one are problematic.
This will take a fairly extensive review of the public records, including the property tax assessments and payment histories concerning the properties. This will take time and considerable man hours. To do otherwise is to buy a pig in a poke.
Moreover, as a negotiating tactic, it makes no sense to give the administration a blank check to negotiate. We all know this. When we buy a car, the salesman always has to chat with the sales manager (to discuss football scores) as part of the standard negotiation. That Paulson will have to come back to Congress for approval of each contract only strengthens the government's ability to negotiate.
In fact, the best course of action would be to have the Treasury Department bring each bailout proposal to Congress to be voted on. There is no reason to agree to a final number at this time. Simply pay as you go.
Moreover, it makes little sense to approve a plan that the next President will not buy into. Obama has already said that the current plan is not acceptable, and McCain has remained silent. One of these two guys is going to end up administering this plan, and if neither is firmly on board, it is a waste of time and money.
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Claims of urgency are central to every con.
September 22, 2008 9:24 PM | Reply | Permalink
Ok by me to wait till the next administration. Just calmly tell people: "Help is on the way. Be patient for a few months."
September 22, 2008 10:53 PM | Reply | Permalink
I agree that everyone needs to step back from this and take a deep breath.
There may be a much better solution if we get more perspective.
Remember the story where the truck gets stuck trying to go under a bridge and they couldn't figure out how to get it out... and a little kid says why don't you let the air out of the tires...
Well maybe there is something else we can do. Is there a way to bolster the housing market, the economy from the bottom up side that would make the assets these institutions are holding more valuable? I don't know what the answer is but
Making giving Paulson economic superpowers to wow all his friends with is not the answer.
There must be tranparency and accountability...something the Bush adminstration doesn't know anything about.
September 23, 2008 2:38 AM | Reply | Permalink