Another Dead Canary

Well, Congress passed the bailout bill and President Bush quickly signed it but not before lawmakers loaded it with corporate handouts stuffed into the bill at the behest of lobbyists for the banking industry. It looks like Treasury Secretary Henry Paulson is already rewarding several of his old buddies at Goldman Sachs with jobs overseeing how this $700 billion handout will be spent.

Is this going to pull the economy out of its tailspin? Some analysts arent’ so sure, saying the plan is no cure-all for what’s ailing Wall Street. Here’s what Bloomberg columnist Jonathan Weil had to say:

What’s stunning is how little the taxpayers would get in return for their money under Paulson’s package, and how illusory much of the banks’ newly minted capital would be.

Under the plan, Treasury would buy some companies’ troubled assets at above-market values. To boost their capital, Paulson would have to pay the companies more than what their balance sheets say the assets are worth. Then other companies would use the rigged prices to write up, or avoid writing down, the values of similar holdings on their own books.

So, the taxpayers get hosed on the asset purchases. Other banks use the trumped-up prices to cook their books. And investor confidence supposedly is restored.