- The Washington Times - Friday, September 26, 2008


House and Senate negotiators, including Democratic and Republican members of the Senate Banking Committee and House Financial Services Committee, announced yesterday that they had reached a framework for a $700 billion financial bailout package. Many of the specifics remain vague, but House Speaker Nancy Pelosi said President Bush had agreed in principle with Democrats on basic conditions for the bailout, including help for homeowners (in other words, a bailout that will include many irresponsible people who acquired homes they could not afford) and an equity position for taxpayers in companies that accept public funds (a more plain-spoken description would be one word: “socialism.”)

And if the government is unable to recoup the $700 billion cost from the sale of bad mortgage-backed securities — a distinct possibility, given the poor quality of the assets taxpayers will acquire — Mrs. Pelosi wants Congress to leave open the possibility of raising taxes.

The politicians responsible for putting this deal together are busy congratulating themselves for their statesmanship and foresightedness. Barack Obama and John McCain were in attendance at the White House to give their political blessing to the framework, and lawmakers may decide to spend the weekend debating the bill - with an eye toward getting something passed before the stock market opens on Monday. Senate Majority Leader Harry Reid wanted Mr. McCain in Washington to deliver Republican votes for this massive expansion of government’s role in the economy, and Mr. McCain obliged. The Republican presidential nominee suspended his campaign and returned to Washington - and Washington is precisely where he should have been since he agreed with the president who said last week that we are in the midst of an economic crisis. Mr. McCain will either rise to Mr. Reid’s expectations to expand the federal Leviathan or fall by standing alongside Sen. Richard Shelby and fiscal conservatives who say no bailout.

Perhaps the most unfortunate thing about all the Republican support for this fraudulent “rescue” plan is that there are free-market alternatives that have been essentially ignored during the debate. These include repeal of (or at a minimum, dramatically scaling back) legislation such as the Community Reinvestment Act, which gives liberal activist types legal authority to shake down corporations to get them to give mortgages to people who are bad credit risks. It also includes reducing or temporarily suspending capital-gains and corporate income taxes to strengthen the financial industry. But these alternatives appear to have been largely ignored by Mr. McCain and many of his fellow Republicans.

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