He says that the Paulson plan - according to his calculations - could net the Treasury a cool profit between $1.0trn and $2.2trn… a sum which could change the budget scenario in D.C. over the next 10 years. Still no takers on this forum?
Actually, once I started to figure out what was being proposed, I haven’t really been against the bailout… which surprises me, because I wouldn’t have assumed I would take this position. The fact that it might be a good trade is something that helps me support it, because - long term - this public intervention ought to be able to pay for itself. However, there are short term effects (taxes, inflation, or higher interest rates) that would be uncomfortable. There are some things to be careful about: 1) Oversight: you don’t want to set up what might amount to an executive-branch hedge fund which, if profitable, undermines checks and balances (specifically Congress’ power of the purse), and which, if it blows up, places taxpayer money and/or US credit ratings at risk. That’s just too much power to the executive branch, and there is no clear need that this kind of concentration of power is necessary to resolve the crisis. 2) Rush to implement: There are probably parts of the crisis that need immediate resolution… you need some temporary liquidity and you need some confidence that something positive is in the works, but you don’t need the whole package signed by noon, or midnight, or whatever. It’s better to phase this in. As far as I can tell, the rush to implement something is the traditional administration attempt to say “We’re in crisis, give us more power.” It was the same for Iraq with the authority to launch invasions because we feel like it, and now they want to buy a bunch of things and set up their own hedge fund which can be used as an executive slush fund.