From the NYT:
After Congressional staff members worked through the night to hammer out the details of the remarkable rescue effort, Senate and House negotiators gathered for a meeting in the Capitol on Thursday morning, hoping to resolve any final disagreements ahead of the White House gathering.
The Democrats had all but eliminated their differences, and both sides were hoping for a bipartisan consensus to emerge at midday, with the final imprimatur to come at the late afternoon meeting with President Bush, the Congressional leadership and the two presidential candidates.
On Wall Street, shares, which had opened higher, rose sharply on expectations of a rescue plan.
In a brief speech on the Senate floor, the majority leader, Harry Reid of Nevada, said he expected the Senate be in session on Saturday to cast its first procedural votes on the bailout proposal, in which the government plans to buy distressed debt from financial firms and stave off what President Bush warned could be a widespread economic collapse.
Sen. John McCain, who suspended his presidential campaign so he could limit his focus to the Wall Street crisis (he is no multitasker apparently), said this morning that he doesn’t believe a resolution is near. If lawmakers are close to a consensus — and McCain is correct about this; it is questionable — word is that the final bailout plan may not include protections for home-mortgage customers facing foreclosure. No wonder many lawmakers are still opposed to the scheme.
Yes, something must be done — and fast. But if the plan does not include protection and mortgage reviews and rewriting for struggling homeowners, mandated interest to be paid on the $700 billion corporate-welfare loan, salary caps for fatcat execs and a ban on golden parachutes, and lots of federal oversight, it should die a hasty death so that a workable plan can be created. (Dive into Ralph Nader’s proposed alternatives too.) The plan has to protect Wall Street, yes, but it has to help Main Street too.
Financial-market wise guys, who had been seized with fear, are suddenly drunk with hope. They are rallying explosively because they think they have successfully stampeded Washington into accepting theWall Street Journal solution to the crisis: dump it all on the taxpayers. That is the meaning of the massive bailout Treasury Secretary Henry Paulson has shopped around Congress. It would relieve the major banks and investment firms of their mountainous rotten assets and make the public swallow their losses–many hundreds of billions, maybe much more. What’s not to like if you are a financial titan threatened with extinction?
… A serious intervention in which Washington takes charge would, first, require a new central authority to supervise the financial institutions and compel them to support the government’s actions to stabilize the system. Government can apply killer leverage to the financial players: accept our objectives and follow our instructions or you are left on your own–cut off from government lending spigots and ineligible for any direct assistance. If they decline to cooperate, the money guys are stuck with their own mess. If they resist the government’s orders to keep lending to the real economy of producers and consumers, banks and brokers will be effectively isolated, therefore doomed.
Only with these conditions, and some others, should the federal government be willing to take ownership–temporarily–of the rotten financial assets that are dragging down funds, banks and brokerages. Paulson and the Federal Reserve are trying to replay the bailout approach used in the 1980s for the savings and loan crisis, but this situation is utterly different. The failed S&Ls held real assets–property, houses, shopping centers–that could be readily resold by the Resolution Trust Corporation at bargain prices. This crisis involves ethereal financial instruments of unknowable value — not just the notorious mortgage securities but various derivative contracts and other esoteric deals that may be virtually worthless.
Read the NYT article in its entirety: