U.S. policy makers say tentative rescue plan is set

U.S. policy makers, working through Saturday night into Sunday, said they'd had outlined a plan to rescue the financial system but needed to put it on paper before saying that they had a final deal, The Wall Street Journal reported Sunday morning. Treasury Secretary Henry Paulson, House Speaker Nancy Pelosi, and Senate Majority Leader Harry Reid stood with top negotiators to announce the tentative accord on a $700 billion plan to have the Treasury purchase bad assets, the Journal reported

One of the readers made the following comments:

Well, the bill for bailouts is already over a trillion dollars. Not much if you say it quickly is it? My problem with the modified Paulson Plan, quite apart from the undue haste with which it was negotiated, is that it is not likely to have more than a short-term effect. Tomorrow, the DOW will jump as the lemmings fall for the stunt, but within a week all the nasty stuff will return to haunt us. My other reservation, other than the fact that I don't like govermental interference in the market, is that there is no guarantee that the bailout will actually work in the way that they hope. My greatest fear is that it won't work in any sense and the "powers that be" will turn instead to a policy of frugality: meaning extremely high interest rates. If the latter actually comes to pass, the current climate of forclosures is going to look like a picnic by comparison.

50 years ago, American debt was owned entirely by Americans. Today, that is not the case and the reactions from the foreign holders of debt is simply not predictable over the longer term, i.e. over 30-days! In this past week Paulson and friends engineered a deal whereby banks from the G7 agreed to buy hundreds of billions of dollars of American debt in an act of solidarity. So far so good, but we have to ask what happens next time -- because assuredly there WILL be a next time. The trillions of dollars' worth of worthless derivatives "paper" is still zooming around in cyber space and there will be a final reckoning because nature cannot tolerate a financial vacuum