Tuesday, September 30, 2008

So, what will happen on Thursday? The WSJ (which favors a bailout) worries that:
One option is that Democrats will tell Mr. Paulson that they can pass his plan with more liberal votes, but that their price has gone up. This would mean more of the tax, spend and regulate provisions that House GOP leaders stripped out before their rank-and-file headed for the exits. These would only raise the price for taxpayers of the Treasury rescue and, if the equity provisions were too onerous, make the Paulson plan far less workable.
I'm hoping for the following alternative:
If Mr. Paulson wants to be a statesman, he could offer a Plan B that avoids giving Treasury such a big blank check. Instead, he could propose more public capital for the Federal Deposit Insurance Corp., which would do more of the creative financial plumbing it has done over the last week. (See here.) This will have to happen next year anyway, and the FDIC has long experience protecting taxpayers for public capital injections through preferred stock and warrants.


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