About this Wall Street bailout...

So as I understand it, the basic problem is that banks and related institutions aren't willing to lend money even to one another, much less to ordinary customers with good credit, not to mention ordinary customers with questionable credit, because they're not sure they have enough cash to cover themselves if more loans go bad. And the fact that nobody else will lend money to Customer X makes Customer X look like a bad credit risk to the next bank.

So isn't the obvious answer "Lend the banks money"? Not "buy their bad loans," not "buy stock in them," not "increase the FDIC guarantee level," but simply put a bunch more cash into the banking system, with reasonably low interest rates and repayment terms ranging from a few months to a few years. This also has the effect of expressing the government's confidence in whichever banks it lends money to, which should shore up the rest of the world's confidence in those banks. And since it's a loan, it should be fairly low-risk for the taxpayer. It doesn't "buy the investment bankers off the hook," only give them more time to straighten up their acts in an orderly fashion, so it's more politically palatable than buying their maybe-bad debt; the bad debts are still the banks' problem, but they (and their creditors) don't have to worry about going belly-up right now.

Of course, I think that's what the Federal Reserve normally does in tight-credit situations and economic downturns, and they've already done it a few weeks ago. Is there a reason that simply doing the same thing on a larger scale wouldn't solve the problem?

So why reject the Wall Street bailout?

How many times in the past seven years has King George III told the American people "There's a disaster looming, and you have to give me broad new powers, without any oversight or accountability, so I can protect you from it. It's really urgent; there's no time to discuss, debate, or even read my proposal; just approve it. Trust me."? How many times have he and his appointees proven worthy of that trust? How many times have they used those broad new powers to help the Republican Party and its major donors, rather than the country or the world?

I heard a radio commentator the other day say "President Bush's natural tendency is to reassure people," and I almost drove off the road laughing. President Bush's natural tendency is to create terror, so people will give him what he wants. Just like a terrorist who hijacks an airplane. And why not? It's worked for the past seven years....

I'm willing to believe (not Dubya, but people of more intellectual stature like Bernanke and Paulson) that this time there really is a wolf, and something does need to be done. But I have a hard time believing that the right answer is to write this notoriously corrupt and irresponsible administration a blank check for $700 billion, three months before it leaves office. (It's hard to imagine, for example, that bailout money won't go preferentially to banks that have promised to hire high-ranking Treasury officials in January. And, as an NPR commentator pointed out last week, Treasury doesn't have enough finance staff to manage this whole project: they'll need to contract it out, and the only companies with the expertise to manage it properly are the ones getting bailed out. There is no way to run this bailout without massive graft and influence-peddling.)