Hank Paulson needs to go to a Dale Carnegie Sales course. Half of you probably never heard of that but he needs to go to some sort of sales seminar to learn how to sell a program and not try to ram it down people's throats. It clearly wasn't enough to say this isn't a bailout of Wall Street. It is a bailout of Wall Street. It also is a bailout of Main Street, but of problems caused in large part by Wall Street. The American voter cannot be railroaded. Constituent mail was running overwhelmingly against the program. A deft, sensitive touch was needed and "The Hammer" Paulson, for all his brilliance, didn't pull it off.
The Administration needs to realize it can't risk another defeat. They need to line up the few votes needed in advance. To get a few Republican votes they need to pull out all the lobbying stops they can. Outfits like the Chamber of Commerce have to get on the phone. The Treasury may not like it but it seems more than a few Democrats voted against the bill because it contained no bankruptcy relief for homeowners. Better craft a compromise that can pull a few votes over. If recrafting the bill doesn't work in advance of a vote, go to plan B.
Plan B is to shelve the bill till after the election and do some or all of the following:
1) Suspend mark to market accounting (if you can. ) I don't know how that would work, but it's a man made accounting regulation that has played havoc with our financial system This was not a law handed down with the burning tablets. Change it and relieve the pressure of trying to mark assets to a market that isn't there.
2) The Fed should cut interest rates immediately.
3) Fannie and Freddie, with Treasury backing, should accelerate buying mortgages.
4) John Ryding of RDQ Economics thinks that a Treasury backed asset lending facility should be considered.
5) The Federal Reserve and /or the Treasury should consider a plan to recapitalize banks by buying mortgage related paper in exchange for equity in the banks like Sweden did during its crisis. They have kind of done this with AIG.
6) The FDIC should raise the guaranteed amount for bank deposits. If it is any way legal, the government should buy/guarantee commercial paper to get the system breathing again. Confidence needs to be restored.
I don't know what is doable and I don't know what is even legal. But I know that in crisis there is opportunity. The stock market lost $1.4 trillion in value on Monday. That could have been two rescue plans of $700 billion each! The Administration can't stay bound within its original proposal. I like to say politics is the art of the possible. This is a flawed proposal to deal with a chaotic mess. There is no way it will be anywhere near ideal. But some plan is better than no plan.