By around noon tomorrow, the Paulson bailout/rescue plan will be a legislative reality. The mere fact of Hank Paulson's announcing a huge government rescue for Wall Street pretty much ensured its passage. Global financial markets quickly discounted the Mother of All Bailouts. Hints of its possible failure have led to market swoons, in turn increasing pressure for its passage. That's why the blogosphere and Newt Gingrich and Rush Limbaugh couldn't quite turn the Paulson Plan into Harriet Miers. Trillions of dollars of financial wealth wouldn't let them.
Yet...one wonders if Paulson had announced a different, less expensive plan whether the markets wouldn't have reacted almost as positively. Imagine if Paulson had instead announced that:
1) The Federal Deposit Insurance Corp. was raising its insurance limits to stop depositor runs on U.S. banks;
2) The Securities and Exchange Commission was suspending or clarifying its mark-to-market accounting rules;
3) Transactions involving mortgage-backed securities would be exempt from capital-gains taxes. Or perhaps all transactions, period.
At the very least, a more comprehensive plan would have garnered more political support. It also would have helped had Paulson mentioned that the Treasury might actually make a profit from the sales of those assets (though I wouldn't count on it). And for those of you who hate this bailout—and that's a lot of folks—wait until you see the big housing bailout that might be on its way.