Expedite detailed version of financial rescue plan


POSTED: Thursday, February 12, 2009

A $789 billion bill aimed at injecting money and jobs into the country's ailing economy is headed for congressional approval along economically ideological - party - lines. However, the Obama administration's plan to revitalize the country's stagnant financial market was met with nonpartisan skepticism. The White House should expedite efforts with congressional leaders from both parties to add clarity to the plan and put it into motion.

House and Senate negotiators, including Hawaii's Sen. Daniel Inouye, were quick in eliminating differences in the two chambers' bills, both of which were more expensive than the final product. All House Republicans had voted against the House version and only three Republicans in the Senate had voted in favor of its version.

Republicans wanted the bill to provide mainly tax cuts, but that alone would be insufficient, as in the past, in lifting the economy. The final bill retains a $70 billion tax cut but larger expenditures on infrastructure are expected to protect or produce jobs.

As the negotiators began meeting to resolve the differences, Treasury Secretary Timothy Geithner announced to congressional committees the administration's financial-rescue plan in the vaguest of terms. Investors and economists generally agreed with the plan's direction but cried out for the specifics.

The plan to implement a “;stress test”; of major banks to assess their financial health gained the most favor, but questions remain about what to do with those most in trouble. A new fund would be used to buy as much as $1 trillion in toxic assets. Any bailouts should be accompanied by conditions and possibly give the government a temporary but significant ownership stake, despite predictable howls of socialism.

Geithner said the plan includes an expenditure of up to $50 billion of the $350 billion left over from last year's rescue fund to prevent home mortgage foreclosures, which are averaging 10,000 a day. He said details for both the bank bailout and the home foreclosure plans would be worked out in the next few weeks.

The plan also includes expansion of a Treasury and Federal Reserve program to finance as much as $200 billion in student loans, car loans and credit card debt. The plan could be broadened to include commercial and residential mortgage-backed securities.

While the lack of particulars was frustrating to economists and investors, whose reaction was reflected by the plummeting stock market, it is understandable in the wake of former Treasury Secretary Henry Paulson's failure to consult with Congress about changes in the Bush administration's rescue plan.

While President Obama's extended hand was met with Republican clenched fists in the weeks leading to the largely Democratic economic-stimulus package, he should make an extra effort to engage both parties in the financial rescue effort, including the details.