Partners

28Sep08

A deal was announced early this morning that may save Wall Street, for now – but it is moving ahead without regard for what will be destroyed in the process.

The bill includes pay limits for some executives whose firms seek help, aides said. And it requires the government to use its new role as owner of distressed mortgage-backed securities to make more aggressive efforts to prevent home foreclosures.

This video explains how Democrats got us to this point.

Too much meddling by Washington in how loans were given out led to this crisis. The solution? Step up the meddling exponentially.

In some cases, the government would receive an equity stake in companies that seek aid, allowing taxpayers to profit should the rescue plan work and the private firms flourish in the months and years ahead.

We’ll own a piece of Wall Street, and Wall Street, more than ever, will own us. Democrat’s criticism of President Bush’s social security privatization plan seem humorous in retrospect.

The White House also agreed to strict oversight of the program by a Congressional panel and conflict-of-interest rules for firms hired by the Treasury to help run the program.

The administration had initially requested virtually unfettered authority to operate the bailout program. But as they moved toward clinching a deal, both sides appeared to have given up a number of contentious proposals, including a change in the bankruptcy laws sought by some Democrats to give judges the authority to modify the terms of first mortgages.

Occasionally, the fact that our government is controlled by lawyers has a positive side effect. Even Democrats were scared of the idea of letting judges take away the ability of the mortgage system to function on a retail level.

What happened to the alternative plan favored by some congressional Republicans? They gave up on it.

Officials said they had also agreed to include a proposal by House Republicans that gives the Treasury secretary an additional option of issuing government insurance for troubled financial instruments as a way of reducing the amount of taxpayer money spent up front on the rescue effort.

The Treasury would be required to create the insurance program, officials said, but not necessarily to use it. Mr. Paulson had expressed little interest in that plan, and initial cost projections suggested it would be enormously expensive. But final details were not immediately available.

Where are Barack and McCain on this? They’ve been briefed, but are apparently too focused on winning the White House to worry about how it is financed.

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