Opposition Growing to Mother of All Bailouts (MOAB)

I haven’t seen any polling on the Paulson bailout plan. But my guess is that politicians in both parties have been polling this privately and are discovering that the American people oppose this plan in its current form. While many people – including regular folks and highly-informed elites – recognize that some form of bailout is necessary, the manner in which we are told to accept this Paulson plan at face value strikes people as wrong.

First, Barack Obama opposed the bailout today in a speech in Charlotte. He outlined seven points that should govern any bailout plan. The Paulson plan fails to offer transparency, provides no protection for borrowers and homeowners, and gives too much authority to Paulson and no oversight.

John McCain has now expressed skepticism of the plan too, mostly because it provides no independent oversight over the bailout plan.

So, while both candidates expressed support for the notion of a bailout, both have opposed the specific Paulson plan. They might each seek to take advantage of the safety in mutual dislike of the plan and insist that partisans oppose it too. There is now very little political fallout for opposing the Paulson plan on either side.

And it seems that many Congressional Democrats and Republicans are opposing it – even those who initially supported Paulson. Most important is Speaker Nancy Pelosi, who is planning to add several Democratic amendments.

Although House Minority Leader John Boehner supports the bill in its current form, many conservative Republicans have expressed opposition to the plan. Texas Rep. Jeb Hensarling says, “At this point, Congress is being asked to support an uncertain entity, costing an uncertain amount of dollars, for an uncertain duration — a decision that will have implications for generations to come and requires absolute certainty.”

Even Newt Gingrich has come out against the plan, signaling to conservatives that it’s OK to oppose Bush on this publicly (there was no doubt they opposed it privately).

And finally, there are the profanity-laced tirades from some Democratic members in communications with Open Left. Yes, there is real anger out there that Wall Street will be getting a lot for nothing.

Watch closely this week to see if opposition coalesces around a singular point. There is actually a lot of agreement between Obama and McCain on what’s wrong with the plan. The Dems want to punish the executives on Wall Street – the way they did the leaders of Fannie Mae and Freddie Mac. House Republicans don’t want that, but I could see McCain backing sanctions against these executives. On oversight they both agree. And both seem to support more protections for homeowners, although Obama is much stronger on this.

Perhaps most important is the signal the contenders send to other members of Congress. Had Obama and McCain supported the Paulson plan, Congressional leaders in both parties would have pushed the plan through as is – perhaps by Wednesday. But by sending a signal that’s it alright politically to oppose the Paulson plan, Congressional leaders will feel emboldened to offer their own amendments.

What will be interesting to watch is Wall Street. Lobbyists for Wall Street will play hardball all week and will threaten total global financial collapse if Congress does not act now. It’s very likely that the gains of Thursday and Friday will disappear as the bailout plan falls into doubt. Will Congress cave into Paulson’s demands at that point? Will they stand firm in their demands for more oversight?