Thursday, September 25, 2008

Modified, Limited Bailout

The Journal's Real Time Economics has the "agreement on principles" from the Congressional negotiations over the bailout package.

Under the heading of "taxpayer protection" it calls for "equity sharing," a suggestion that has percolated through the economics blogosphere (see previous post). Keynes once said "Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist." Perhaps now economists don't need to be defunct, just have a web site....

The Congress also wants limits on executive compensation and efforts to facilitate mortgage restructuring instead of foreclosures. They also are only willing to make $250 billion available immediately (though $700 billion remains "authorized").

Via Mankiw, a defense of the Paulson plan. Willem Buiter says its "a useful first step," and he's not a fan of the changes apparently being made by Congress.

In the Washington Post, James Galbraith argues for using the traditional mechanisms for protecting the banking sector instead.

Meanwhile Post columnist David Ignatius is asking the right question: WWJMKD?

1 comment:

Avatar said...

Have you looked who stands to gain the most from these bailouts? The Federal Reserve System.