Dogs that didn't bark

One of the strange things about the whole bailout discussion is the number of dogs that didn't bark. Credit is supposed to be hard to get, but credit cards are still sending around low interest rate offers. The broader economy is supposed to be at great risk but local chambers of commerce are not beating the drum in favor of the bailout.  Contrast their nonchalance with their their behavior towards legislation such as raising the minimum wage.

But that seems to be changing.  Paulson's original bailout plan was horrendous because it made no financial sense for the taxpayer.  With modifications for equity stakes and oversight, it has become much more reasonable.  The failure of the bill in the house seems to have waken up folks who are peripheral to this mess.  Retail investment companies where most Americans hold their 401(k)'s and other savings have started to explain the bailout to their customers -- this is the email Fidelity sent out.  Today's Norman Transcript carried an article about Tom Cole (the local congressman who did vote for the bailout) calling it a tough but necessary vote.   McCain has turned on a dime again and stopped demagoguing the bailout -- he's even taken to calling it a rescue.

None is explaining, though, why the bailout is supposed to work.  Sure, I get that every credit crisis in the past has been addressed by infusion of liquidity.  But the scale of this crisis -- $45 trillion in credit swaps -- is dwarfed by the size of the "rescue" ($700 billion).  The only way it will work is if the underlying mortgages are rolled out, right? So why aren't bankruptcy judges being given a shot at rewriting the terms of mortgages?

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