Policy is at its worst when it is rushed. Compromises are made under the guise of a crisis that no rational man would take, if given his leisure. There are other options versus rushing into a bailout:
- Do “one off” bailouts until the new year. Then let the new Congress, with fresh authorization from the electorate, attack the problem, rather than a bunch of lame ducks. (As an aside, the panic engendered by the Bush, Jr. administration over the Iraq war is now serving them badly as they try to rush decisions here.)
- To the Republicans: no deal is better than a bad deal.
- To the Democrats: no deal is better than a deal that you will be saddled with if it goes wrong, particularly if you can’t get Congressional Republicans to go along.
- Another option is doing a new RTC. Wait for financial institutions to fail, then be the undertaker… selling off the assets in a better credit environment.
- Yet another option would be offering a tax credit on all mortgage interest paid over 8%.
- Let the Fed flood the short term money markets with liquidity, sparking inflation that no one can dispute. This will solve the crisis in the short-term lending markets at the cost of more inflation.
- Relax rules to allow foreigners and private equity (still further) to own US financial assets.
- Let financial institutions offer shares to the government in exchange for being bailed out.
Anytime someone rushes you to a decision, watch your wallet. The crisis is not as severe as many would say, and there are other ways of handling the situation. Stopgap measures will hold us until after the new Congress is in place; there is no reason to rush a bailout.
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That’s got to be right. The feeling of unease I have about this plan is precisely that: why are we in such a rush to do this? Why is there no time to consider the best response? Why are so many people trying to shut down debate and treat Congress like a rubber stamp? Something is wrong.