But Do You Need the Whole $700 Billion Up Front?
Treasury Secretary Hank Paulson's and Fed Chairman Ben Bernanke's $700 billion Wall Street bailout plan is running up against the rough shoals of politics.
The central issue, as elucidated by Sen. Chuck Schumer (D-N.Y.), who is grilling Bernanke before the Joint Economic committee right now, is the following: Why do you need all $700 billion right now? How about if Congress gives you the money in installments, say, $150 billion now, and we'll see how you're doing with it before we give you more?
The New York senator and other lawmakers are trying to fight the "blank check" problem being raised by constituents.
Turns out, Wall Street's psyche is so fragile, Bernanke says, that it won't be soothed by a mere $150 billion.
Schumer said Paulson didn't sufficiently answer the Why? question in yesterday's hearing, so he put it to Bernanke today:
Schumer: "Can you explain why you need it all at once?"
Bernanke: "The concern is that the markets need to have the confidence that the problem will be attacked with sufficient force and addressed." Without the full $700 billion upfront, the government bailout could be perceived by Wall Street as "dribs and drabs," Bernanke said, and the crisis could accelerate.
Schumer tried it another way: "Just from your knowledge as an economist...even if $700 billion is advisable, do you think $150 billion is insufficient to assure the markets that Congress is serious and the government is serious?"
Bernanke responded: "You asked me about my training as an economist; this is a matter for psychology. What signal, what information would the markets get that the government is addressing the problem" if the government bailout arrives in installments, Bernanke asked.
-- Frank Ahrens
Please email us to report offensive comments.
Posted by: Jeff | September 24, 2008 11:58 AM
Posted by: Susan Cronin | September 24, 2008 12:11 PM
Posted by: soccerxyz | September 24, 2008 3:27 PM
Posted by: Anonymous | September 24, 2008 4:40 PM
Posted by: Andy | September 25, 2008 1:58 PM
Posted by: mofares | September 26, 2008 3:30 PM
The comments to this entry are closed.