So all we have are sketchy details at this point, but if they hold, I'm liking the new bailout deal. Early indications are that Pelosi, Reid, Frank, and Dodd stood their ground. We got oversight, pay limits for CEOs, bank stock for taxpayers, and mortgage renegotiation for homeowners.
The plan calls for the Treasury Department to buy deeply distressed mortgage-backed securities and other bad debts held by banks and other investors. The money should help troubled lenders make new loans and keep credit lines open. The government would later try to sell the discounted loan packages at the best possible price.The legislation would place limits on severance packages for executives of companies that benefit from the rescue plan, but details were sketchy.
Also, the government would receive stock warrants in return for the bailout relief, giving taxpayers a chance to share in financial companies' future profits.
To help struggling homeowners, the plan requires the government to try renegotiating the bad mortgages it acquires with the aim of lowering borrowers' monthly payments so they can keep their homes.
The measure's main elements were proposed a week ago by the Bush administration, with Paulson heading efforts to push it through the Democratic-controlled Congress. Democrats insisted on greater congressional oversight, more taxpayer protections, help for homeowners facing possible foreclosure, and restrictions on executives' compensation.To some degree, all those items were added.
At the insistence of House Republicans, who threatened to sidetrack negotiations at midweek, the insurance provision was added as an alternative to having the government buy distressed securities. House Republicans say it will require less taxpayer spending for the bailout.
But the Treasury Department has said the insurance provision would not pump enough money into the financial sector to make credit sufficiently available. The department would decide how to structure the insurance provisions, said Sen. Kent Conrad, D-N.D., one of the negotiators.
Money for the rescue plan would be phased in, he said. The first $350 billion would be available as soon as the president requested it. Congress could try to block later amounts if it believed the program was not working. The president could veto such a move, however, requiring extra large margins in the House and Senate to override.
The insurance program is complete unworkable bullshit, dreamed up by a death cult that should be put to the flame by rational men -- the House GOP. The banks aren't in position to put up insurance money for their bad loans right now. Besides nobody knows how much the bad mortgages are worth, and it's hard to properly insure volatile assets like those.
Fortunately, Paulson gets to design it, and heis a rational man who agrees with Barney Frank that the insurance program is unworkable. My only concern is that Paulson is going to pull some kind of scam that uses the insurance provision throw money at his Wall Street buddies. But assuming that we've got serious oversight built into this, we can keep him from doing that. So he'll just design a fifth wheel insurance plan that doesn't get used.
Nobody has the details yet, and they could change. But this looks pretty good.
By the way, if you're up for some nice reporting of the inside DC shenanigans including the White House meeting, Jonathan Weisman's Washington Post article gives McCain a much larger share of credit for blowing up the old bipartisan bailout deal than had been previously allotted to him.
