The Trouble With Henry

Economic professor and NY Times columnist Paul Krugman doesn't think this federal bail out is such a great idea:

I hate to say this, but looking at the plan as leaked, I have to say no deal. Not unless Treasury [Secretary Henry Paulson] explains, very clearly, why this is supposed to work, other than through having taxpayers pay premium prices for lousy assets.

As I posted earlier today, it seems all too likely that a “fair price” for mortgage-related assets will still leave much of the financial sector in trouble. And there’s nothing at all in the draft that says what happens next; although I do notice that there’s nothing in the plan requiring Treasury to pay a fair market price. So is the plan to pay premium prices to the most troubled institutions? Or is the hope that restoring liquidity will magically make the problem go away?

...And there’s no quid pro quo here — nothing that gives taxpayers a stake in the upside, nothing that ensures that the money is used to stabilize the system rather than reward the undeserving.

I hope I’m wrong about this. But let me say it again: Treasury needs to explain why this is supposed to work — not try to panic Congress into giving it a blank check. Otherwise, no deal.

As much as I think some sort of government intervention was needed, the scope of the administration's proposed plan does pose some very, very important questions. And the congress should make sure those questions are answered, and that the American people aren't being taken for a ride, before they pass the proposed bailout package.

This is, after all, the administration of George W. Bush. When it comes to handling crises, America and the rest of the globe don't trust the man one bit. He's a proven failure and, as such, the congressional leadership need to bend over backwards to make sure this proposal is solid and and that it isn't going to bury an already crumbling economy deeper into a hole.

House Speaker Nancy Pelosi (my congresswoman here in San Francisco) is already on my shit-list for not putting impeachment on the table and, most recently, for caving on the off-shore drilling issue. In fact, she will not receive my vote on November 4th for those two reasons. It'll be a protest vote, as she is sure to retain her seat by a wide margin, BUT...if she rolls over for a banking bill that will turn the economy on its ass, she'll need to pray to high heaven that she doesn't get a primary challenge the next time she stands for re-election.