In today’s WSJ, the Treasury has agreed in principle to a few key changes to the bailout plan:
- More Congressional oversight
- A homeowner bailout, possibly in the form of adjusted mortgages for people who are struggling but can actually afford the houses (and a provision preventing renters from being booted when houses are foreclosed on–which will likely clobber the resale market), and
- Ability for government to take an equity stake in companies it helps, with the decision possibly dependent on the amount of capital the government puts in play.
The last piece is important. It’s not clear why Paulson left it out of the original plan, because he has used it in all the previous bailouts and it was used successfully in Sweden in the early 1990s, but in any event, now it appears to be included.
Paulson is holding fast on one key point, which is sensible:
- Limits on executive pay at companies who accept government money. This makes sense in theory, but in practice it would be a nightmare (how much is enough? Who gets to decide? For how long?). Paulson also believes it would deter companies from taking the money. He’s certainly got that right.
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