How Will the Bailout Work? No One Actually Knows

Albert Bozzo
CNBC
Thursday, Sept 25, 2008

If taxpayers are having trouble understanding the Bush administration’s Wall Street rescue plan, they might want to think of it in terms of some popular TV shows: "Who’s the Boss?" "Deal or No Deal" and "Jeopardy."

Though Congress has expressed legitimate concern about adequate oversight and transparency, the bigger questions may be about concept and execution—or how the game is played—as it concerns management, assets and pricing.

"Who's the Boss?"

Though no one wants the creation of a massive government agency, the program will have to be administered by someone.

Neither the Treasury nor the Federal Reserve is an appropriate choice. At one time, Freddie Mac [FNM 1.74 --- UNCH (0) ] and Fannie Mae[FRE 1.89 --- UNCH (0) ] might have been, but those organizations been discredited in the credit crunch crisis.

In the S&L bailout, the government had “existing government resources,” says former regulator and White House economist Lawrence White. “It had the benefit of an asset-disposal unit already up and running at FDIC.”

“What government agency is going to oversee see this?” money manager Eric Novde told CNBC, referring to a million properties and assets to “make sure they are properly managed.”

Though there's been some talk about the FDIC, Treasury Secretary Henry Paulson seems to be counting on “really good asset managers,” as he called them during his Congressional testimony Monday, under the supervision of the Treasury, which will have “full discretion over the management of the assets,” according to the outline released over the weekend.

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