Remember that rush to pass the largest bailout in the history of the United States, in which Congress agreed to hand over $700 billion to the treasury secretary without any oversight? Remember how it had to be wrapped up right away so that the government could begin buying up the “toxic mortgages” of teetering banks?
Never mind. Treasury Secretary Henry Paulson today confirmed the government has given up on that idea, and will stick instead with Plan B, buying ownership stakes in banks.
Says the BBC:
However, many analysts said he was right to backtrack on the plan to buy up the bad debts, saying it was difficult to see it being workable, and that simply buying up more banking stock was more straightforward.
But if it’s difficult seeing it workable now, why wasn’t it seen as difficult working when the plan was passed by lawmakers, anxious to get out of town before the election?
The Newark Star Ledger editorial today tackles that question:
Fairly or unfairly, the impression was one of haste by Bush administration refugees from Wall Street looking out for their former (and perhaps future) colleagues in the battered financial industry. It’s an impression reinforced now by news that the bailout process has produced a little-advertised tax windfall of up to $140 billion for U.S. banks.
And, yet, history seems about to repeat itself, but this time the Democrats are in charge. They’re calling for emergency aid to automakers. Workers in the auto industry are to the Democrats what bankers and stock brokers are to Republicans.
Paulson appeared to rule an auto bailout out, today. Last night on Charlie Rose’s show, Bill Ackman, the hedge fund manager who seems on the verge of trying to take Target Corp. apart, made some interesting arguments for forcing the automakers into bankruptcy. He said taxpayer money would just be spent paying the interest on debt the companies acquired six years ago, money the automakers have long since lost. Bankruptcy would turn the company over to the banks (which essentially own it already) and allow a mechanism for it to survive in better long-term shape.
Unfortunately, Rose’s Web site hasn’t posted the video yet. It was a fascinating dissection of the economic crisis. Equally unfortunate, Rose ran out of time just as he was about to turn to Ackman’s intent with Target.