The Washington Post reports that the following "deal" has been reached:
Paulson would receive $250 billion immediately and another $100 billion upon White House certification of its necessity. The final $350 billion could be dispersed without additional Congressional approval, but Congress would be given 30 days to object.
In other words, fully half of the mind-staggering sum of $700bn will be available to the Bush Administration to dispense with no further Congressional green-lighting.
This is a far cry from Schumer's suggestion to try the approach first to the tune of $150bn. (The difference of $200bn is equal to one-third the cost of the entire Iraq War up till now by one estimate.)
You may say: but don't we now have a guarantee of "strong oversight"? That's not the issue. The issue is that the entire approach of this "bipartisan deal" (which, if Dems are suckers and McCain is wily could be a trap that plays as anything but bipartisan) may be entirely wrong and ineffective, so that we need to keep our options open for a Plan B, instead of surrendering an astronomical amount to Paulson now.
I don't need to rehash here the many discussions and alarms suggesting that these huge sums of money could go to the wrong people (the rich financial pyrotechnicians who got us into this under the Republican deregulation regime) or could leave the fundamental situation just as dire. The point is simply that the unknowables and risk of these scenarios can't be shrugged off to the tune of $350bn.
Here a couple examples of damn smart economists who are profoundly unsure that this bailout scheme is the right way to go:
1. James K. Galbraith, A Bailout We Don't Need:
Is this bailout still necessary?
The point of the bailout is to buy assets that are illiquid but not worthless. But regular banks hold assets like that all the time. They're called "loans."
...Keep $200 billion or more in reserve, so the Treasury can recapitalize banks by buying preferred shares if necessary -- as Warren Buffett did this week with Goldman Sachs. Review the situation in three months, when Congress comes back. Hedge funds should be left on their own. You can't save everyone, and those investors aren't poor.
2. Paul Krugman's entire blog of late:
But there’s another possible explanation, which I find terrifyingly plausible: the plan came first, and all this stuff about price discovery is an after-the-fact rationalization, invented when people started asking questions.
It has seemed very strange to me that such a supposedly crucial economic program would be based on such an exotic argument. My sneaking suspicion is that they started with a determination to throw money at the financial industry, and everything else is just an excuse.
Cf. George Soros, Paulson cannot be allowed a blank cheque
(This is my first diary. I'm just feeling really sick at the prospect of passing a bloated and misdirected measure that could handicap Obama's policies and priorities for the country's future.)