CAMBRIDGE – Spend in haste; repent at leisure. With minds concentrated by fears of another 1930’s-style Great Depression, America’s political leaders developed, virtually overnight, a $700 billion bailout plan to resuscitate the country’s rapidly deflating financial sector. But, just as stunningly, rank-and-file members of the US House of Representatives have rejected it – at least for now. Perhaps they were right to be skeptical.
The plan’s central conceit is that government ingenuity can disentangle the trillion-dollar “sub-prime” mortgage loan market, even though Wall Street’s own rocket scientists have utterly failed to do so. To boot, we have been told that government is so clever that it might even make money on the whole affair. Perhaps, but let’s not forget that a lot of very smart people in the financial industry thought the same thing until quite recently.