By now, either you’ve heard US Treasury Secretary Hank Paulson on the Sunday morning talk shows or you’ve read about what he has said on the US government’s bailout plan. There are tremendous issues with the plan as it charts a course distinctly different from what has been used in the past.
Let’s start with the bill itself: it’s 3 pages long. Only 3 pages long….And it asks for a staggering sum of money with wide ranging powers to buy the broadest amount of mortgage related securities with a minimal of oversight. Other than that, it’s great.
It asks for $700, 000,000,000 and needs to amend the statutory limit on the public debt to borrow it. Then it asks lawmakers in Congress to pass the bill in a very speedy manner to stave off the collapse of the US financial system. Last time I checked, there’s no provision in the US constitution to turnover the country’s check book to one plan, one department, and one man.
This is a huge leap of faith and I suspect that leaders of Congress and the presidential candidates will urge caution or act cautiously. Yes, this is the time for action. No, this is not the time to essentially restructure the entire financial system of the country that has worked well up until we had 1% interest rates. There are other solutions and ideas that need to be considered. Remember, this is not an RTC type situation where the government already had the bad assets put to them via the FDIC and then had to figure out what to do. This is a takeover of choice