The hilarious point of the bailout

Members of the Senate Banking Committee told Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke at Tuesday's hearing that they've been inundated with phone calls from constituents about the proposed $700 billion financial system bailout. The voters, the senators reported nervously, are overwhelmingly against it and more than a little bit angry.

The senators really wanted the witnesses to help them explain to the voters why the bailout is good for them, and not just for the financial titans who appear to be responsible for the mess.

The answer came slowly, but if you watched the whole hearing, as we just did, the answer became clear.

"Last week it was impossible to get financing for a new car unless you had a credit score of 720 or better," one senator said.

So that's it.

The credit crisis is a lack of credit for people with middling-to-bad credit.

Secretary Paulson tried without success to explain to the senators that restrictions on executive compensation would cause the banks to refuse to participate in the program.

They'll participate if they need the bailout, the senators said repeatedly. If they don't need the bailout, the taxpayers shouldn't be bailing them out.

Secretary Paulson tried again to explain that the goal is stabilizing the system and restoring confidence.

He sounded like a man who didn't want to tell the plain truth.

It sounds like the plain truth is that the banks are adjusting to the situation pretty well, thanks, and now they'd prefer not to lend money to any more people who are likely to default on their loans.

If you're an incumbent Republican administration, this is a level of fiscal responsibility that simply cannot be tolerated.

It means fewer cars will be sold and U.S. automakers will lay off workers. It means irresponsible college students who don't pay their credit card bills won't be able to get college loans and they'll have to move back in with their furious parents. It means companies that make major appliances and sell vacations and rely on the American public's habit of buy-now-pay-maybe are going to see their business limited to customers who have good credit, or pay cash.

The Bush administration apparently believes there aren't enough of those customers to keep the economy out of recession.

So the Treasury Department is proposing a $700 billion federal intervention to relieve the banks of the last wave of unpaid debts. That will restore "confidence" so banks will again take a chance that Americans with bad credit will pay their bills.

The banks need their "confidence" restored because the sub-prime mortgage orgy demonstrated that there are plenty of people who will happily skin a banker if given the opportunity.

"No bad behavior should be rewarded," one of the senators said.

You have to love political comedy.


Copyright 2008

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