I don’t oppose a massive bailout to our financial industry. We really are on the brink of total economic collapse and failing to act will dry up credit markets, bringing the economy to a halt.
But that doesn’t mean we should rush willy-nilly into a bailout package just because Secretary Paulson says so. Calling every demand for consumer protection or borrower protection a “poison pill” does NOT instill confidence that the Administration’s plan is on the level. A poison pill describes an attempt to sabotage a well-negotiated package from passage. Demanding that this bailout take into account some of the real-world consequences of the financial crisis, provide limits to Paulson’s authority to dispense with troubled assets, or insist on more transparency regarding the pricing mechanism for purchasing bad assets (not to mention concerns over foreign banks falling into this plan and the refusal to hold anybody on Wall Street accountable for this mess) is NOT a “poison pill.”
It’s called Due Diligence.
Note that we’ve been here before politically. In 2002 we HAD to pass law authorizing force against Iraq because Saddam Hussein could hand his WMDs off to Al Qaeda at any given moment. Failure to act NOW could mean catastrophe. Or so we were told.
In 2001, after 9/11, lawmakers insisted that we needed a complete overhaul of counter-terrorism policy and so passed a deeply-flawed PATRIOT Act with virtually no debate.
The Bush Administration does not deserve the benefit of the doubt here. Henry Paulson may be a wonderful Secretary of the Treasury, and he may have the best interests of all of us at heart. But we cannot simply take him at his word.
Let’s have a vigorous debate on this plan this week. Let’s hear from voices of opposition in both parties – and there are many. Let’s hear the Administration defend keeping this plan as is. And then let’s hold a vote at the end of the week or next week. The Fed has already provided enough liquidity to global credit markets that the economy will survive the week.
Let’s get this right. Otherwise, we will saddle the next Administration with a gigantic debt obligation and little chance to address other matters. Even worse, this plan might not even work. The government might not be able to move these bad assets at “premium prices.” And what about the moral hazard here? Wall Street is given a blank check to do this again.
Stop and think!
[UPDATE]
Speaker Nancy Pelosi opposes the Paulson plan as is. She calls it a blank check with no protections for homeowners or borrowers.
Knowing that many conservative Republicans have opposed this too, hopefully we will have a serious debate on the plan over the next few days.