Legal Commentary

The Bailout Legislation

By Big Tent Democrat

Krugman's take:

Section 113, MINIMIZATION OF LONG-TERM COSTS AND MAXIMIZATION OF BENEFITS FOR TAXPAYERS, is where the rubber meets the road — it’s where the plan says something about how the deals will be done.

As I read it, Treasury can
(1) conduct reverse auctions and suchlike
(2) buy directly — but only if it gets equity warrants or, in companies that don’t issue stock, senior debt

. . . The plan’s real traction, if any, is in (2), which is a backdoor way to provide troubled firms with equity — and the bill seems to say that taxpayers have to own this equity, although I wish it was clearer how much equity will be judged sufficient. Not a good plan. But sufficiently not-awful, I think, to be above the line; and hopefully the whole thing can be fixed next year.

Obama and Dems should run on how they will take care of ordinary middle class American homeowners if and when they win the election.

By Big Tent Democrat, speaking for me only

Full post as published by TalkLeft on September 28, 2008 (boomark / email).