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The $810 billion bailout plan was just approved by the House of Representatives after a second vote by a margin of 263-171. That's a lot of taxpayer money for a plan that misses the target. And with stocks falling well off the highest levels of the day, I gather that investors are not too surprised that it passed.
To put this in perspective, the Dow now trades 631 points below where it was on the morning of the record 778 point decline on Monday. That's when the House voted thumbs down on the original plan. I guess taxpayers will need to spend a few trillion dollars to get more of those triple digit gains.
Meanwhile, I think that unless the Treasury can solve the thorny problem of setting a price for the mortgage-backed securities (MBS) and collateralized debt obligations (CDOs), then it will fail to solve the real economic problem -- which is a lack of trust in the financial system. I've proposed what I thought would be a better solution.
Maybe we can try that one next week if stocks drop another 700 points. There seems to be no limit to the amount of taxpayer money the government is willing to throw at this financial crisis.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.
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