Time to Step Up and Support Rescue Plan
We've said throughout this crisis that anything coming out of Congress should be as simple as possible, and passed as quickly as possible. Our feeling is that the longer it takes Congress to come up with a rescue plan, the more likely it will include things that shouldn't be there.
But that's precisely what's happened. In addition to the $700 billion to help restore our financial system, the latest version of the rescue bill includes $112 billion in added tax breaks and spending.
Some of those ideas might be good, but do they really need to be in a bill addressing an economic crisis? While we're at it, doesn't it suggest a lack of seriousness on the part of Congress that what started out as an elegant, easy-to-understand three-page plan — the Paulson plan — ballooned to a byzantine 451 pages in just 10 days?
The emerging Senate compromise includes such things as relief for those hit by natural disasters ($8 billion), renewable energy tax breaks ($12 billion), a fix for the alternative minimum tax ($62 billion) and a temporary lift on deposit insurance limits to $250,000 from $100,000.
And, as part of the overall effort, the Securities and Exchange Commission has said it will encourage the Federal Accounting Standards Board to ease "mark-to-market" accounting rules that some companies claim have added to financial market chaos.
It's clear that rescue by committee isn't, as President Bush described it, very "pretty." The plan emerging from Congress looks needlessly complex, like a Rube Goldberg device. And yet, the clock is ticking; every day a rescue is put off is a day we edge closer to the financial abyss.
That's why we again call on Congress to move quickly to pass this legislation. Sure, the stuff they've hung on this Christmas tree is unsightly. But the basic rescue bill is needed, even vital.
And no, it's not a "bailout for Wall Street," as popularly repeated. Average Americans have yet to feel the full force of what a credit crisis means. Once they do, they won't like it a bit. A credit crisis doesn't just mean banks stop lending to one another, or call in loans from Wall Street "fat cats." It means you might not get the credit you need to pay for a car, a home or a child's education.
It means many medium to large companies will not be able to go into the money market to finance their daily operations. Those that can't will be forced to pull back on expansion, slash investments across the board, reduce their purchases, maybe shut down marginal businesses and lay off workers.
All this could cascade into a deep economic downturn that will last years. The victims, however, won't be gazillionaires on Wall Street. It'll be you. That's why, despite IBD's impeccable free-market credentials, we support the rescue plan. Time for taking effective action is running short .
As the old saying goes, the perfect is often the enemy of the good. We agree that this rescue package is far from perfect. But with time of the essence, we'll take the good and hope for the best.
It's possible that once the Treasury has snapped up a good chunk of the damaged mortgage portfolios now on banks' books, normal lending will resume and the economy will pick up. If so, the government will eventually be able to unload the bad mortgages at a small loss, limiting taxpayer cost.
This happened from 1988 to 1992, when the Resolution Trust Corp. unloaded a huge portfolio of real estate assets. Today as then, action is needed to prevent a meltdown.