Bailout Danger

There are many policy dimensions to the Paulson/Bernanke bailout. Will this work? How do we protect the American taxpayer from this turning into a windfall for a bunch of grossly irresponsible people? Why does Paulson want this to be beyond oversight by Congress and the courts?

But there's a political dimension that's barely been examined. Last Wednesday, Rasmussen published a poll that disclosed:

Only seven percent (7%) of voters think the federal government should use taxpayer funds to keep a large financial institution solvent. Sixty-five percent (65%) say let the company file for bankruptcy.

These numbers are generally the same across Republicans, Democrats and unaffiliated voters.

The timing of the poll was probably critical: it was taken after the government refused to bail out Lehman Brothers, but on the second day of polling, Paulson and Bernanke decided AIG was too big to fail. And it was before Bernanke and Paulson had their "Come to Jesus" meeting with Congressional leaders to ask for $700 billion, with no strings attached.

Is there still such antipathy to bailouts, or have people been scared silly by the dire warnings emanating from Washington?

A hint here. Washington Post reporter Joel Achenbach spent a day in Manassas Park, Virginia. His report:

Hours of interviews in Manassas Park turned up exactly one resident in favor of the [Paulson/Bernanke] bailout, a fellow in a Harvard T-shirt in a big house near the golf course.

This suggests there could be political support for, at a minimum, taking a couple of extra days with this, to make sure the American taxpayer is protected more than Wall Street.

We've got a difficult situation for politicians here. There are dire warnings of financial collapse if we don't follow the Paulson/Bernanke plan, but no assurances the plan will solve the problem. Whatever course we take, we'll never know what would have happened had we taken another course. The economic consequences of making the wrong decision could be enormous; the political consequences will most certainly be so. But the political consequences of making the right decision could be ugly, too.