This economic meltdown is resulting in the largest bailout since the great depression. With $700 billion, the government would be able to buy the bad debt of any financial institution for the next two years. The debt ceiling would be raised from $10.6 trillion to $11.3 trillion. But there is no provision for the government to get anything in return.
Under this plan the Secretary of the Treasury would have broad powers to buy and see mortage-related assets with little congressional oversight. Not everyone is, you’ll pardon the expresson, “buying” this.
In a session with House Democrats, they described a plan where the government would in essence set up reverse auctions, putting up money for a class of distressed assets – such as loans that are delinquent but not in default – and financial institutions would compete for how little they would accept for the investments, said Rep. Brad Sherman, D-Calif., who participated in the conference call.
“You give them good cash; they give you the worst of the worst,” Sherman said. A critic of the plan, he complained that Bush and his economic advisers were trying to panic lawmakers into rubber-stamping it.
Let’s just hope John McCain and his promoters keep telling us how strong our economic fundamentals are. Or did the word “strong” suddenly morph into “crisis”?
