Most economists accept that the nation\u2019s financial crisis \u201d\u201d the worst since the Great Depression \u201d\u201d has reached such perilous proportions that an expensive intervention is required. But considerable disagreement centers on how to go about it. The Treasury\u2019s proposal for a bailout, now being negotiated with Congress, is being challenged as fundamentally deficient.<\/p>\n
\u201cAt first it was, \u201d\u02dcthank goodness the cavalry is coming,\u2019 but what exactly is the cavalry going to do?\u201d\u009d asked Douglas W. Elmendorf, a former Treasury and Federal Reserve Board economist, and now a fellow at the Brookings Institution in Washington. \u201cWhat I worry about is that the Treasury has acted very quickly, without having the time to solicit enough opinions.\u201d\u009d<\/p>\n
The common denominator to many reactions is a visceral discomfort with giving Treasury Secretary Henry Paulson Jr. \u201d\u201d himself a product of Wall Street \u201d\u201d carte blanche to relieve major financial institutions of bad loans choking their balance sheets, all on the taxpayer\u2019s bill.<\/p>\n
There are substantive reasons for this discomfort, not least concerns that Mr. Paulson will pay too much, thus subsidizing giant financial institutions. Many economists argue that taxpayers ought to get more than avoidance of the apocalypse for their dollars: they ought to get an ownership stake in the companies on the receiving end.<\/p>\n