Friday - September 26, 2008

The Brit View from the Telegraph:  Congress must agree Henry Paulson’s cheque

More economic stuff and I don’t think I like this word.  catastrophic

I guess is all depends on what they mean by .....

Congress must agree Henry Paulson’s cheque

Last Updated: 12:01am BST 26/09/2008

Once President George W. Bush had warned the American people in near-apocalyptic language that, if Congress failed to approve his $700billion bank bail-out, the entire US economy was in peril, it became hard to conceive of the deal being blocked.

Henry ‘Hank’ Paulson intends to buy the banks’ toxic debts with the $700 billion

Such once-in-a-lifetime threats can never be made — or taken — lightly. So, despite immense reservations on Capitol Hill, on both sides of the aisle, about the implications of the rescue package and the alarmingly slapdash way in which it appears to have been constructed, no one was under any illusion last night that, if it is not approved, the impact on world markets will be catastrophic.

That has not prevented both the Democratic and Republican leaderships in Congress pushing the plan to the wire. Neither side has been prepared to give Hank Paulson, the Treasury Secretary, the blank cheque he was looking for.

They are right to be appalled at the size of the bail-out, the vagueness of Mr Paulson’s proposals and the unconscionable speed with which he wanted it approved. Congress has felt it is being bounced, and who can blame it?
# £$700bn bail-out deal hangs in the balance

In three days of wrangling, much of it conducted in public, it appears to have succeeded in building in safeguards for the American taxpayer: an oversight board to monitor the plan, combined with a requirement that taxpayers take a share of future profits from assisted lenders. Measures to help mortgage defaulters were also being bolted on.

If President Bush’s warning of Götterdämmerung looks like serving its purpose, his swipe at the “irresponsible actions” of bankers has been less helpful. Yes, some of the market practices we have witnessed in recent years have been hard to defend.

But the President — in much the same way as Gordon Brown in this country — breezily ignores the role of governments in laying the groundwork for this crisis. More precisely, it was the purely political decisions of the major central banks — notably the US Federal Reserve, the European Central Bank and the Bank of Japan — to keep interest rates unfeasibly low for too long to boost their economies that created the cheap money world in which the banks made hay.

If the Paulson deal is sealed and has the desired effect of kick-starting the banking sector, there should be no need for a similar bail-out package in this country. Given that the Government has already committed £50 billion of taxpayers’ cash to rescuing Northern Rock, that is as well.

But this is far from being over. If the Paulson Plan clears Congress, the next big question will be: what if it doesn’t do the trick? Where do we go from here? Are there any more shots left in the locker? These are not comfortable thoughts.

http://tinyurl.com/4r4g3j

Posted by Drew458     on 09/26/2008 at 12:06 PM   
Filed Under: • Economics • Editorials • UK •  
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