Something rankles in trying to assimilate the reported perspectives on the proposed bailout. Why is this crisis happening now? Apart from the forensics regarding the most recent failures (Lehman, AIG), we have a more general crisis mainly because the Bush administration says so. Based on the hostile reaction to Paulson’s plan (people really hate the idea of a big bailout of Wall Street) a political cartoon might show Paulson yelling "Fire!" and proffering the extinguisher-shaped wallet he’s just pulled out of Uncle Sam’s back pocket as the old man gazes at the flames. More below.
To rephrase my first question: Why this plan, now?
First, the math; as this analysis concludes, Paulson’s $700 billion exceeds by two times what it would cost to buy all the bad mortgage debt. If that holds, what is the rest of the money for? Considering how badly this administration has managed the money appropriated for the Iraq War (losing track of billions, awarding no-bid contracts) they have zero credibility left and they must know it. And in that context, especially since the Paulson plan purportedly has been under discussion for months, the detail-free three page memo that primarily proposes a no-strings-attached bailout of the very financial industry that exploited without any fiscal restraint the deregulation for which they themselves lobbied seems designed to incite outrage in the 2008 electorate.
Paulson’s plan, as the basis for whatever gets legislated, seems to answer the question of how to make a final Bush-era transfer of public wealth to the privately wealthy while providing the party currently damaged by George W. Bush’s reputation an opportunity to appear in contrast to a Bush administration plan--just before an election that everyone agrees will be decided on the promise of change.
If congressional Democrats are persuaded to accept the framework of the Paulson memo, all Republicans have a new chance to win. House Republicans, Shelby’s cohort, and the McCain campaign certainly seem to be pivoting accordingly. The narrative of intra-GOP dividedness is the best chance Republicans have of averting a rout in November, especially if voters go to the polls more pissed-off than scared. Gifting the avarice of the debt-swappers, and creating political cover for embattled Republicans: there’s plenty of room for both in the Paulson plan.