The details of the plan are here. The background to the crisis is here. Beyond the price tag, the most compelling criticism of the plan indicates that Paulson's curt 2.5 page proposal grants unchecked power to the Treasury Secretary, creating all-powerful finance czar unaccountable to Congress, the courts, and executive oversight (see here and here).
But will it work?
Well, the plan's not perfect, as the Economist notes, although it "does address the root problem, defaulting mortgages..."
And this morning's Los Angeles Times suggests, the plan may help stablilize the housing market, leading the way to a broader recovery:
The government's $700-billion plan to bail out the banking system may calm panicked financial markets, but its real value may be in buying time to address the root problem: the continuing slide in housing values.Appearing yesterday on Meet the Press, Secretary Paulson was upbeat:
The Treasury Department's rescue plan is far from a done deal, with Democrats saying Sunday that they would push for more relief measures aimed at homeowners facing foreclosure and for stricter oversight of the program that would allow the government to buy up billions of dollars of securities tied to troubled mortgages....
The rescue plan does nothing in itself to shore up the housing market. Rising defaults and foreclosures on home loans, spurred partially by declines in home values, are the cause of the collapse in price and tradeability of the mortgage-backed securities on the books of banks and investors.
But without government action to aid battered banks, financial experts say, mortgages would remain difficult to get and the housing market's recovery would be further delayed.
We're going to stabilize the financial markets. It won't happen immediately, there're going to be bumps along the road, but we need to do it. And this'll be far less costly to the American taxpayer than the alternative...
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