An economist understands the need for a significant bailout of the country’s financial markets, but likewise understands resistance in Congress to the $700 billion plan proposed by the Bush Administration.
Democratic leaders say they are near agreement with the Republican Bush Administration on key portions of the plan to stabilize the country’s financial system, shaken badly by the collapse of the sub-prime mortgage market. The two sides remain apart on some specifics of the plan and rank-and-file members of Congress have been grumbling about it. Administration officials want agreement by Friday.
That’s a laudable goal says economics professor Steve Fazzari at Washington University in St. Louis, but perhaps unrealistic.
"Sometimes maybe moving fast could be at the cost of more careful deliberations about what the right approach is," Fazzari tells the Missourinet. "And I think here, we don’t have as much detail about the extent of which the taxpayers are protected."
Fazzari says past bailouts contain provisions that could pay back the government for its cash intervention. Such arrangements have saved Fannie Mae and Freddie Mac as well as AIG. He says this arrangement could lure the government into buying assets companies are trying to dump.
Fazzari sees Wall Street as fragile right now, being pulled sharply in many directions with the latest news report.
"Many economics, myself included, view it as the most significant financial instability that the country has seen since the Great Depression," says Fazzari.
A somber note to sobering news: Fazzari says he doesn’t believe anyone fully understands what’s happening yet.