A Bailout Deal Gets Done

After a nearly weeklong deliberation, Congress has reportedly reached an agreement on the $700 billion financial sector bailout.

Early reports say the bailout will come in installments, starting with $250 billion available immediately and an additonal $100 billion block to follow if needed, the WSJ is reporting.

The Journal quotes Republican Sen. Bob Corker of Tennessee as saying, "I believe that we will pass this legislation before the markets open on Monday."

Will it work?
Markets seem to think so. The Dow jumped more than 300 points on the news, although gains were in the 220 range in late afternoon trading. Treasury yields were up almost across the board—a sign that scared investors are moving out of safe-haven government bonds. Credit spreads narrowed a bit on the news as well (for a look at what to watch over the next few days, check this handy NYT guide.)

Will it really cost more?
Earlier in the day, Goldman Sachs economists estimated the amount at risk in the mortgage sector at $1.15 trillion. They get there by looking at the total number of commercial and residential mortgages in delinquency or foreclosure versus the total value of all U.S. mortgages. Scarily, Goldman estimates more than 9 percent of the $11.3 trillion in outstanding residential loans are at risk (not to mention 4.2 percent of commercial loans). Still, given the guesswork involved in really figuring out how many mortgages will default (many delinquent ones won't), and the likelihood the Treasury Department might get a discount on the assets it buys, the $700 billion price tag could be about right.