*Bailout proposal, as it currently stands*

[jpgray]

First thing to note: this plan bears almost no relation whatsoever to Paulson's initial proposal. The bailout only commits $250 billion initially, gov't can modify mortgages, and there is significant oversight. Further, tax money is decently protected--any profit is shared by gov't (marginally similar to Sweden's successful approach), and in the case of a loss the money shall be recouped from the beneficiaries of the plan.

Thankfully the -only- House GOP concession made is a sort of anemic insurance plan for bad securities with rates set by the gov't; while companies can choose this over the bailout, most economists deride it as an unworkable alternative. While economists panned the Paulson plan, they -really- despised the GOP scheme of suspending capital gains tax and other deregulatory measures.

Problems? CEO pay limitations are not explicitly laid out, and in other cases we're lacking important specifics. The other obvious problem is that this doesn't go anywhere near far enough, and moreover goes in the controversial direction of buying bad debt. While alternative plans are superior in function and design (such as Sanders's or Galbraith's), they have little chance of passing. If you accept that something is to be done, remember that in the House the GOP + the blue dogs makes for 249 seats--a bold New Deal proposal probably won't pass given the divisions and lack of will in the Democratic caucus.

Latest deal between leaders of both parties:

-- $700 billion in a taxpayer rescue of Wall Street, with $250 billion available immediately, another $100 billion upon report to Congress and the final $350 billion available only upon action by Congress.

-- Money will be used to buy mortgage-backed securities and other troubled assets, taking them from investment banks, commercial banks, smaller community banks, pension plans and even local governments.

-- Government can use its power as the owner of the troubled mortgage bonds to facilitate modifications for the mortgages themselves.

-- Bipartisan oversight commission will monitor the program. If after five years there is a net loss to the taxpayers, president will have to submit legislative proposals to recoup funds from beneficiaries.

-- Democrats won new, unspecified restrictions on CEO pay and executive compensations for participating companies.

-- Republicans won language creating a parallel insurance program that companies can choose instead of giving up their bad assets.

-- Creation of warrants, which allows any windfall coming to participating companies to be shared with the government, thus the taxpayers.

-- Actions by Treasury will be posted online in real time.

--Judicial review of Treasury’s actions.

http://www.mcclatchydc.com/227/story/53189.html