Bail Out With Me Tonight, Bail Out

My mind is a cacophony of half remembered music. This morning, I have “Sell Out” by the Reel Big Fish – only instead of “sell out” the words “bail out” have been substituted. I suppose it might go something like this:

Well, I know you’ll have to work in fast food all your life
but don’t sign that paper tonight, she said,
but it’s too late.

And I don’t remember what I read,
don’t remember what they said,
I guess it doesn’t matter,
I guess it doesn’t matter anymore.

[chorus]
you’re gonna go to the Congress
they’re gonna give ’em all your money
media plays what they want you to hear
they tell me it’s cool but I just don’t believe it…

bail out, with me oh yea, bail out, with me tonight
Congress is gonna give Wall Street lots of money
and everything’s gonna be (all right).

It seems that negotiators in the Congressional leadership and the White House have recovered from McCain’s self-injection into the negotiations on the bail out and have come up with a deal that they’re prepared to recommend to their various caucuses. This stinker will likely have to get substantial support from Democrats and Republicans in the House and Senate. The need to act in this fashion is widely seen as necessary, but nobody is really excited about doing it. And the potential for getting strung up politically is very high. So, you want to make sure if you’re going to do it, every one is on the hook. On the other hand, if it nothing gets done and the markets seize up, fingers will come out very quickly. So, it’s a political game of chicken and it’s not entirely clear that everyone playing knows you have to turn left when you decide to bail.

The plan would work as follows:
1. Money in stages – $250 billion immediately; $100 billion more upon Presidential certification of necessity; and the final $350 billion “after Congress is given 15 days to object.” (I’m not sure if this means that Congress has veto authority or merely that they’re able to say they’d rather it not happen.)

2. Bank funded federal insurance program to protect against losses from troubled assets.

3. Warrants for stock purchases given to the government by participating businesses that can be redeemed if the businesses return to profitability.

4. The Treasury Department would work with banks at modifying the mortgage terms underlying the assets acquired by the Treasury Department.

5. Limitations on compensation for corporate executives at firms participating in the program.

I have read only the summary in the newspaper, but a couple of things that I would have liked to see in addition, if we’re going to engage in this adventure, are provisions to the effect that shareholders from participating companies get paid last and maybe some sort of clawback provision that extracts assets and causes pain to executives who were compensated at some excessive level despite having run their companies into the ground and left American citizens holding the bag.