Just about every economist who supports bailing out the banks thinks that taking an equity stake through a direct infusion of capital is the way to go. While Secretary Paulson had pushed for his buying bad assets approach, he is now playing Hamlet and flirting with the idea of going the equity route.
This is not the time for high school drama. Doesn't Paulson remember his comments from the last two weeks when he told us that the economy would collapse if Congress didn't act immediately? Those statements were not true, and obviously Paulson didn't believe them, since it has now been a week since he got his bill and we still don't have even the outlines of his plans for buying bad assets.
We could harp on the bad faith shown by the administration in using unwarranted fear to force Congress into hurriedly passing the bailout bill. We could also harp on the horrible media coverage on this issue, with the media acting almost as an appendage to the Bush administration in its efforts to increase public support for the bill.
But the immediate issue is to get the Treasury to actually do something to help the economy. That means using its $700 billion in the most effective way possible by directly injecting capital into the banking system. What will it take to get Paulson to move?
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