Someone has to say it: the bailout bill -- or, ahem, rescue plan as it's now suddenly being branded by its handlers -- that has passed the Senate this Wednesday evening and is now on its way back to the House is absolutely, fundamentally no different than the bill that was already rejected on Monday. It is by no means "revised," despite what media reports are suggesting. Two items have been added. Only two. First, an entire pork-barrel's worth of tax credit extensions. And second, an increase in the FDIC insurance limit, up to $250,000 from the $100,000 most of us have come to know and love. Which led a colleague to remark earlier today via email, only half in jest, "maybe they socialize health care while they are at it." Nothing about the actual bailout itself has changed. The same questions are there, buried under tax credits for environmental remediation costs and railroad track maintenance, between the credits for Indian employment and mine rescue team training -- and somewhere after language increasing the limit on cover of rum excise tax to Puerto Rico. (I'm not making any of the previous items up, they're in the 451 bloated pages that's being sold as a "revamped" bill). I've gone over some technical concerns with the basic bailout proposal in the past, but allow me to crystallize my take on this as clearly as I can: let the FDIC do its freakin' job. The folks at the Treasury act as if the FDIC didn't exist, or as if they didn't understand the commercial banking system -- which I suppose shouldn't surprise, given the backgrounds involved. And with independent Wall Street i-banks already history, it's pretty much all commercial banking at this point anyway; so we're in a weird sort of old-is-new-again financial world. One that's well-suited for the brass tacks at the FDIC, too. Yes, that means that I'm not personally convinced we need this flavor of a bailout; and it also means that I'm certain that irrespective of the bailout and its associated bacon bits that we're in for some serious economic pain anyway. And it means that there are some complex and technical reasons why this particular proposal might serve to make things much worse on the credit front than proponents are currently thinking. But as much as I think there is probably a better way to go about this (a colleague will share his thoughts with HW readers in Thursday's email), I also don't know that the FDIC doesn't end up obviating most of this debate when all is said and done. In fact, an oft-missed provision in the bailout proposal, actually authorizes the FDIC to borrow unlimited funds from the government, if needed. From a source much smarter than I'll ever be, a veteran analyst:
I wonder if in the end we don't see FDIC bolstered, ... [and] investment banks and insurers who played where they shouldn't left to hang. And Hank's $500mm in Goldman stock options, too.
Ah, yes, the alleged "gold phone" rumored to exist somewhere in the bowels of the Treasury. We can dream, can't we?