Monday, September 29, 2008

America won't bail out Wall Street

The defeat of the bailout in the House means that the authors of this defective, bungled legislation will have to do a lot better. The basic problem is not House Speaker Pelosi's ill-timed accusations against the Republicans, or Minority Leader Boehner not corraling more GOP members -- it's the bailout bill itself.

Americans, whether they're on Main Street or in academia and the think tanks, don't, for the most part, don't want a "bailout" of Wall Street. They want the Street to go through a "workout." They're not emotionally reacting to punish Wall Street. What they want, which is difficult to communicate accurately in the inflamed atmosphere, is a process that will deliver results based not on hysteria but reality, however fugitive reality may be right now. Yes -- inject money into the financial institutions that can cope with their problems if they can buy time till housing prices increase enough to make their most shaky mortgage securities stable. The only alternative for the weakest institutions is for them to go under. In which case they can be bought out, again with government assistance, to the extent that's necessary to protect homeowners.

The current bill, despite the massaging it received in House and Senate negotiations over the past several days, doesn't go this route. It remains essentially what Treasury Secretary Paulson crafted. Not surprisingly, Paulson, the former CEO of Goldman Sachs, came up with a bailout instead of a workout.

A bailout won't make it. Who will show the leadership to come up with a legislative solution that lets Wall Street work out its problems instead of being bailed out?

Obama, McCain, are you listening to America?