Congress, in an appalling failure of imagination, approved Treasury Secretary Paulson's wrongheaded plan to bail out financial firms that acquired too many risky assets. He got his $700 billion check (in installments) to start snapping up distressed bonds and other investments that have taken a tumble in the U.S. housing meltdown. Ironically, members of Congress who voted for the unpopular legislation will probably glumly console themselves that they made a tough but necessary stand. Come on. It requires little courage to play the role of the outraged lapdog. Not one of 535 legislators deemed it worthy to craft an alternative, despite all the better ideas put forth by economists on the right and left.
But what's past is past, so let's look forward. Here are my predictions for the post-bailout bill future.
1. This bill, despite all the hoopla, won't even be the big rescue effort. We’ll see a more aggressive, all-encompassing solution that will probably involve seizing banks. Once this moment arrives, look for a few commentaries on the themes of “Where the hell did that $700 billion go?” and “Why didn't we just do this in the first place?”
2. Now there will be a financial version of the Oklahoma land run, as companies from Singapore to Switzerland, carrying a Baskin-Robbins assortment of toxic financial waste created in America, race forward to dump it with the U.S. government. Look for brigades of lobbyists and politicians to step in and try to direct the spoils, since everyone knows that $700 billion won't be nearly enough to buy up all the crap out there.
3. Success has many fathers; failure is an orphan. When this rescue plan flops, look for at least one of its high-profile backers to disown it publicly (Paulson? Pelosi? Dodd?) This person will complain bitterly about not being told some vital bit of information, or about how the original good idea got perverted in the execution because of all those damned incompetent Washington bureaucrats/Democrats/Republicans.
4. There'll be a House cleaning when voters go to the polls in November.