Bailout may be on an installment plan
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KAI RYSSDAL: Back a couple of months ago Henry Paulson used a line in congressional testimony that I’d bet right now he’d rather not have said. Talking about a possible bailout of Fannie Mae and Freddie Mac, Paulson said he had to have a bazooka in his pocket, that is, huge financial authority — but he’d probably never have to use it.
We all know how that turned out, right? Well, as John mentioned, in the deal lawmakers announced today, they’re going in the other direction. Not giving the whole 700 billion in one shot. What Wall Street’s eventually going to think of that we don’t really know yet.
Marketplace’s Nancy Marshall Genzer explains.
NANCY MARSHALL GENZER: Treasury Secretary Henry Paulson’s pitch has been pretty straightforward — gimme the money and make it snappy.
Here he is on ABC.
HENRY PAULSON: We need this to be clean and quick, and we need to get it in place.
But some lawmakers are saying, “Wait a second. Let’s dole the money out.” They want to establish benchmarks for the bailout. Once a benchmark is met, Wall Street companies get a little more cash.
Bruce Josten is the Chamber of Commerce’s chief lobbyist. He says dribbles of cash won’t do much to ease the credit crunch.
BRUCE JOSTEN: Credit depends on confidence, and what we have in front of us right now is a lack of both.
Josten says if you drag out the bailout, investors will lose faith in the plan — a fatal blow to the economy.
BILL CHENEY: I don’t think that’s a fatal blow to anything.
Bill Cheney is chief economist at John Hancock Financial.
CHENEY: I don’t think it makes any difference that it comes out in, let’s say, $150 billion installments. These are still some pretty big numbers.
And, Cheney says, it’s impossible to spend $700 billion all at once.
Hugh Johnson of Johnson Illington Advisers understands both sides. But . . .
HUGH JOHNSON: Now, that’s the political process. Neither one’s going to come out on top. And just as in any political process there has to be compromise.
Johnson says both sides need to listen to the ultimate authority — taxpayers — who want to slow down and figure out where their money is going.
In Washington, I’m Nancy Marshall Genzer for Marketplace.
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