President Bush’s dramatic statement to the nation last night was aimed at persuading recalcitrant House Republicans to support the bailout bill. His bald statement that without immediate action by Congress, “America could slip into a financial panic, and a distressing scenario would unfold” was meant to create the political pressure to bring them into line.
Today, Obama and McCain will join key Congressional leaders at the White House to try and hammer out a deal. McCain in a bold but risky moved has pushed for postponing the first presidential debate on Friday until Congress reaches a deal. Obama has cleverly responded by saying the president should be able to multi-task. (Indeed, the events of the past week have shifted the presidential race in Obama’s favour in a potentially decisive way.)
The three main obstacles to be resolved are oversight and accountability, cost and the potential for rewards for failure. Paulson’s plan gives the Treasury and the Fed remarkable powers. He says these are needed because it is an emergency. But there is going have to be some kind of oversight, perhaps by a commission of Washington wise men as The Washington Post proposes. The plan is also going to have be altered so that it does not appear to be corporate welfare for a financial sector that has, in large parts, behaved irresponsibly. Expect Alan Meltzer’s plan to offer loans which would have to be repaid before dividends or bonuses could be awarded to gain traction in the coming days.
PS To read the Archbishop of Cantebury’s article on the moral message of the current crisis click here
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