Let’s be completely clear about what Congressional Democrats and Republicans did.
They started with a list of objections to the Paulson plan, and a list of unrelated legislative priorities. These included, among other things: punishing executives of failing financial firms; giving taxpayers a direct upside from the recovery of the financial system; making the bailout fully risk-free for taxpayers; giving Congress the opportunity to second-guess and modify the plan later; satisfying the demands of the AFL-CIO, which popped up with a laundry-list of extraneous items they’ve been trying to enact for years; allowing overextended homeowners to avoid foreclosure; and funding left-wing activist groups.
Then, in a marathon of acrimonious negotiations, Congress added some version of all of these things and more. Paulson and his negotiating team from Treasury were concerned above all that they retain the ability to execute the core of the original proposal. In case you’d forgotten, that was to borrow money from global investors to buy distressed mortgage securities, and either hold those to maturity or sell them at a profit.
So it appears that the Treasury negotiators were basically successful. As far as I can tell, the sausage makers kept in some version of almost all of their weird extras, but softened each one to the point that it would have little effect in the real world.
All Congress really wants is to be able to say they did all of these little things. Not that they did them in a way that will mean anything to anyone. And these meaningless extras will become the focus of the news reporting about the bailout.
This wasn’t an exercise in intelligent legislation. It was an exercise in butt-covering ahead of an election.
And everyone in Congress knows it, too. That’s why they’re all hanging their heads, saying that this was something they had to do, even though they all think it’s just dreadful.
Congress’s priority now will be to sell the bailout as a valiant response, lovingly written and carefully directed by our very own Dear Leader, Barack Obama, to a problem caused by eight years of evil Republicanism.
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