No $700 billion impulse purchase

Advice to congressional leaders: Pause, take a deep breath, repeat three times, “Our job is to deliberate.” “Our job is to deliberate.” “Our job is to deliberate.”

With $700 billion-plus at stake in the planned bailout of America’s tottering financial sector, it must be done quickly and right, not rushed and wrong.

The job of the executive branch is to propose. Treasury Secretary Henry Paulson has done that with a plan to buy up bad mortgage loans and the mysterious securities that investment banks concocted out of them and sold at immense profits.

The value of those securities is so unclear and doubtful that the uncertainty alone has spooked investors. Financial institutions throughout the world bought them on the assumption that their eight-figure-salaried touts on Wall Street knew what they were doing. Now that the world has discovered the folly and greed permeating these transactions, investor panic poses a potential threat to entire national economies.

The U.S. government – which was asleep at the switch as the crisis developed – must do something. The massive buyout appears unavoidable.

But Paulson and other financial leaders want it done yesterday, and on their terms. Under Paulson’s plan, he and his successor would unilaterally spend the public’s money vacuuming up bad paper around the planet.

That provision alone is a showstopper. The U.S. political system is premised on checks and balances; Paulson proposes to appoint himself a Roman dictator with unrestricted emergency powers over the largest sector of the American economy.

Other provisions of his plan would let reckless shareholders and executives pocket dividends at the public’s expense as the Treasury purchases distressed securities at an unavoidable premium.

Some congressional leaders, to their credit, aren’t letting themselves get stampeded into a remedy that may be as bad as the disease. Some provisions Congress must insist upon:

 • Oversight of the U.S. Treasury’s actions – broad enough to preseve the public interest but loose enough to allow timely decisions.

 • A guarantee that taxpayers will eventually get back as much as possible of the premiums paid on those purchases. This means some form of equity in the institutions being bailed out.

 • Renegotiation of mortgage terms with responsible homebuyers now threatened with default.

 • Complete public transparency of all purchases and prices of these securities.

Time is of the essence, as evidenced by the continuing slide of the stock market this week. But reckless haste is not of the essence. A $700 billion decision should not be made in a few days. Perhaps a few weeks. Congress should be able to reassure investors by offering a date certain – in the near future – for action.

So, let’s see some deliberation. This is an immensely complex problem, and it demands a complex solution – and safeguards for the taxpayers. In America, the executive is supposed to make decisions of such magnitude in close consultation with Congress. Far more important that it be done right than done right now.