Bailing on the Bailout?

It looks like the bailout deal, if there ever was one, is collapsing… Democrats and Paulson are whining.

ABC News’ George Stephanopoulos Reports: Treasury Secretary Henry Paulson fears the Wall Street bailout deal is falling apart after a chaotic White House meeting, sources say.

Paulson walked into the room where Democrats were caucusing after today’s meeting at the White House and pleaded with them, “Please don’t blow this up.”

Rep. Barney Frank, D-Mass., chair of the House Financial Services Committee was livid saying, “Don’t say that to us after all we’ve been through!”

House Speaker Nancy Pelosi said, “We’re not the ones trying to blow this up; it’s the House Republicans.”

“I know, I know,” Paulson replied.

Chris Dodd’s trying to pin the blame on McCain:

At a press conference earlier yesterday on Capitol Hill, Senator Dodd and his fellow negotiators claimed they had reached a bipartisan consensus on the plan.

But he claimed that Mr McCain’s involvement threw a spanner in the works.

After the hour-long White House meeting, he said: ‘What has happened here is that we have spent seven straight days to find a rescue plan for the economy.

‘What this looked like was a rescue plan for John McCain. To be distracted for two to three hours by political theatre doesn’t help.’

Democrats said the Republicans were on board with the deal until Mr McCain intervened.

There’s just one problem… McCain didn’t bring up those proposals.

Personally, the Paulson plan is a non-starter with me… I much prefer the alternatives offered by House Republicans:

• Rather than providing taxpayer funded purchases of frozen mortgage assets, we should adopt a mortgage insurance approach to solve the problem.
  
• Currently the federal government insures approximately half of all mortgage backed securities. (MBS) We can insure the rest of current outstanding MBS; however, rather than taxpayers funding insurance, the holders of these assets should pay for it. Treasury Department can design a system to charge premiums to the holders of MBS to fully finance this insurance.
  
• Have Private Capital Injection to the Financial Markets, Not Tax Dollars. Instead of injecting taxpayer capital into the market to produce liquidity, private capital can be drawn into the market by removing regulatory and tax barriers that are currently blocking private capital formation. Too much private capital is sitting on the sidelines during this crisis.
• Temporary tax relief provisions can help companies free up capital to maintain operations, create jobs, and lend to one another. In addition, we should allow for a temporary suspension of dividend payments by financial institutions and other regulatory measures to address the problems surrounding private capital liquidity.
• Immediate Transparency, Oversight, and Market Reform. Require participating firms to disclose to Treasury the value of their mortgage assets on their books, the value of any private bids within the last year for such assets, and their last audit report.
• Wall Street Executives should not benefit from taxpayer funding. Call on the SEC to review the performance of the Credit Rating Agencies and their ability to accurately reflect the risks of these failed investment securities.
• Create a blue ribbon panel with representatives of Treasury, SEC, and the Fed to make recommendations to Congress for reforms of the financial sector by January 1, 2009.

Unfortunately, I think we’ve reached the point where a bailout is necessary evil, I’m not convinced that tax payers should be the ones footing the bill though.Regardless unless they remove the foolish government regulations that effectively force banks to make risky loans we’re going to be right back here somewhere down the road.