Treasury’s Plan
Sunday, September 21, 2008The Wall Street Journal has the text of Treasury’s financial rescue legislation, i.e., the bill authorizing the purchase of mortgage-related assets.
Also, a WSJ Q&A.
UPDATE: (4:20 p.m.): This column, “A Bad Bank Rescue” by the Washington Post’s Sebastian Mallaby is gaining wide circulation. In it, he explains why it’s false to compare the provisions to the Resolution Trust Corporation’s formation to overcome the S&L crisis. And there are preferable alternatives, Mallaby writes:
Within hours of the Treasury announcement Friday, economists had proposed preferable alternatives. Their core insight is that it is better to boost the banking system by increasing its capital than by reducing its loans. Given a fatter capital cushion, banks would have time to dispose of the bad loans in an orderly fashion. Taxpayers would be spared the experience of wandering into a bad-loan bazaar and being ripped off by every merchant.
Newt Gingrich, meanwhile, chides conservatives for preparing to acquiesce to the Administration’s plans and says Congress is owed some answers before it acts. And there are multiple crises hurting the economy, he he argues in a column published at National Review Online,
There is an immediate crisis of liquidity on Wall Street.
There is a longer time crisis of a bad energy policy transferring $700 billion a year to foreign countries (so foreign sovereign capital funds are now using our energy payments to buy our companies).
There is a longer term crisis of Sarbanes-Oxley (the last “crisis”-inspired congressional disaster) crippling entrepreneurial start ups, driving public companies private, driving smart business people off public boards, and driving offerings from New York to London.
There is a long term crisis of a high corporate tax rate driving business out of the United States.
No solution to the immediate liquidity crisis should further cripple the American economy for the long run. Instead, the liquidity solution should be designed to strengthen the economy for competition in the world market.
Another point from Gingrich: Congress already passed a “grotesque” $300 billion housing bailout paying off politicians’ left-wing allies. Didn’t work, did it?