I was worried by Paulson's initial bailout plan. Only three pages? No oversight? $700 billion?
Worse, Paulson didn't seem sure he knew what to do with the money. When Lehman Brothers went under and things suddenly got dramatic, well, quite frankly, it looked like nobody had any idea what to do (Certainly not John McCain or Barack Obama, and, unsurprisingly, not the current President either). It was as if Paulson had stepped into the vacuum and said, well, since we're not sure what to do about it, how about we throw lots of money at it and hope it works?
So I hoped that additions would be made to the plan. I was glad there was questioning and opposition. I hoped somebody would come up with some more specific suggestions!
What I was not hoping for was this. Now, I'm glad that the bill that passed the Senate includes more oversight. I approve of giving the money in installments. But I'm deeply disappointed that the critical eye of many Senate members, even at a time like this, seems to be mostly on the lookout for irrelevant but costly concessions.
I'm not even sure I approve of the suggestion that we help out "Main Street" by bailing out the small people who owe on their mortgages as well as the big companies. Not if it costs more money. I don't want to see lots of random spending. I don't necessarily want that spending to be based on who is more deserving. I want to see 'bailout' money used as wisely as possible. If this article is to be believed, the approach currently outlined is well short of shrewd.
There's a real, scary problem here that needs solving. Slacktivist points out this incredibly informative piece from NPR and This American Life detailing the problems faced by small businesses and areas of the market which had nothing to do with sub-prime mortgages. There's nothing fundamentally wrong with those areas of the economy, it's just that they need day-to-day credit to survive. They pay off that credit, and quickly. We're not looking at dodgy loans here. But the whole credit market is in danger of freezing because loans that looked secure before -- mixed packages of mortgages -- have been shown to be stupidly risky, so nobody really feels like lending money to anyone right now.
I am not an economist (IANAE). Still, here's a thought. What if, instead of trying to bail out the purveyors and packagers of dodgy mortgages and hoping that this will make everyone forget what happened, the government were to focus on finding a way to secure the rest of the market? Protect the innocent, so to speak. IANAE, and I've got no clear idea of what we could do with any amount of money, but what could we do with $700 billion focused directly at the problem of availability of credit in general? For example, could we find a direct way to make the commercial paper market more secure? After all, I get the impression (with many repetitions of IANAE) that it's not that insecure to begin with, it just feels that way. I would have thought propping up a system that is still mostly sound but with a lot of uncertainty might be easier than mopping up a system that is fundamentally unsound. What if the government proposed temporary insurance on certain kinds of lending that probably won't fail, just for a few months until the crisis eases?
IANAE. Is bailing out banks and investors the only way to make credit available out there, or is there another way?