CBO Director: Bailout Could Worsen Crisis
Peter Orszag, director of the Congressional Budget Office, dropped a couple of surprises during his testimony before the House Budget committee this morning on the government's response to the current crisis.
Treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke are steadfast in their support of their $700 billion bailout plan, saying it's the best chance for preventing the economy from sliding into deeper trouble.
Today, Orszag said, essentially: Eh, maybe not.
"Ironically, the intervention could even trigger additional failures of large institutions, because some institutions may be carrying troubled assets on their books at inflated values," Orszag said. "Establishing clearer prices might reveal those institutions to be insolvent."
Orszag talked about the paperwork cost of the bailout to the federal budget -- which only would be a small percentage of the overall cost -- and said, "CBO expects that the administrative costs of operating the program could amount to a few billion dollars per year, as long as the government held all or most of the purchased assets."
How many is a "few"?
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