The Bailout Must Go Forward-- Sans Section 8

For some reason I did not have my usual knee-jerk, negative reaction (that I have when anyone from the Bush Administration opens their mouth) when I heard about the $700 Billion bailout. I didn’t really know what to think about it one way or the other; is it a good idea or a bad one? It would be nice to believe that I was reserving judgment because I wanted more facts about the plan, but I think the truth is that I just didn’t grasp the scope and necessity of the bailout. Fortunately I caught Steven Pearlstein on Hardball.

Steven Pearlstein writes about business and the economy for The Washington Post. His journalism career includes editing roles at The Post and Inc. magazine. He was founding publisher and editor of The Boston Observer, a monthly journal of liberal opinion. He got his start in journalism reporting for two New Hampshire newspapers -- the Concord Monitor and the Foster's Daily Democrat. Pearlstein has also worked as a television news reporter and a congressional staffer. Pearlstein was honored with the Pulitzer Prize for commentary for his columns about mounting problems in the financial markets.

Pearlstein made a very, very convincing argument as to why this bailout MUST happen, and happen within the next week or so. The gist of Pearlstein’s argument is that this bailout isn’t so much a bailout of the greedy Wall Street idiots as it is a bailout of our entire American economy. Yes the $700 Billion is going to go to buy “bad” debt from Wall Street, but in reality taking the bad debt off the books allows Wall Street and the other banks to get their balance sheets in a much healthier position that will enable them to stave off failures (which would destroy the economy) AND more importantly start the flow of capital again so that we don’t disrupt business and economic health in our country and around the world.

Getting money flowing again into businesses and other investments is the only way that America can survive this economic crisis. The only way to get the money moving is to stabilize Wall Street and the Banking Industry. If we don’t we will see businesses collapse, job losses, capital will dry up, and we all will be in a really, really bad place.

The $700 billion bailout also gives the taxpayers (through the Govt) ownership and shares in most of these companies, so there is a good chance the $700 Billion will not just go down the drain. The bad debt that we are going to buy could even go up in value. Think of it as buying into a very risky deal that may or may not go up in value.

Pearlstein figures the most likely scenario is that we will either lose or gain about $200 Billion on our $700 Billion bailout. So, on the downside we could lose about $200 Billion of that $700 Billion, but the downside of NOT doing the bailout is not a recession but an absolute depression. It may suck, but not doing it will be even worse.

I am appalled by Section 8 of the Paulson proposal which gives the Secretary of the Treasury (Paulson) complete personal discretion as to how the $700 Billion is used and that his decisions cannot be reviewed or challenged in any court or by any administrative agency. That means not even the slightest bit of oversight. None at all. That’s absolutely ridiculous and it must be removed in the final version of the bailout.

Yes, once again the Bush Administration has gotten us into a situation where it’s going to cost us a fortune and nobody really wants to do it, but it’s too late now to do nothing at all.