Sept. 24, 2008 -- Though the ongoing financial crisis was years in the making and its fallout will undoubtedly shape U.S. fiscal policy for years to come, the secretary of the treasury urged Congress Tuesday to act "quickly and cleanly" on approving a multibillion-dollar bailout measure.
Time is money, goes the old proverb, but members of Congress -- both Democrat and Republican -- as well as a chorus of economists have questioned the urgency with which Bush administration officials want to act.
They want a measure that would not only allow the federal government to buy up and resell $700 billion worth of troubled mortgages, but also put much of the authority to do so directly into the hands of the treasury secretary.
That secretary, Henry Paulson, urged lawmakers "to avoid slowing [the bill] down with other provisions that are unrelated or don't have broad support."
Each of the groups calling for caution on the bailout bill has its reasons for doing so -- be it the ideology of free-market Republicans, the politics of regulation-prone Democrats or the practical concerns of independent economists.
While Paulson and Federal Reserve chairman Ben Bernanke, who also pleaded Tuesday the case for quick action, are well regarded in the business community, some critics have compared the bailout to the haste with which the Bush administration made the case for war in Iraq.
"This was years in the making, can't Congress wait a week to actually think about it?" asked Barry L. Ritholtz, CEO of Fusion IQ, an institutional research firm and author of "Bailout Nation: How Easy Money Corrupted Wall Street and Shook the World Economy."
"Weren't these the same guys who two months ago told us everything was fine? The administration is proposing the biggest bailout in history. Shouldn't we not rush into this?" he asked.
Sen. Jon Tester, D-Mont., echoed that sentiment on Capitol Hill, asking: "Why do we have one week to determine $700 billion that has to be appropriated or this country's financial system goes down the pipes?"
Financial Experts: What's the Bailout Rush?
Ritholtz equated the response by Congress and the media to the administration's plan to their lack of critical review in the lead up to the Iraq War, when many of the administration's claims about weapons of mass destruction went unquestioned.
"No one wants to be accused of causing a run on the bank or a panic, but by the time you really have to worry about that we're way out of cycle. Didn't we learn from Iraq that you need to ask the questions and ensure there is oversight," he said.
A bipartisan group of lawmakers is calling for added provisions to the bill that would not only limit the power of the treasury secretary -- whose actions under the current draft "may not be reviewed by any court of law or any administrative agency" -- but that would also limit the use of taxpayer funds for multimillion-dollar golden parachutes for the executives of failed financial-services firms.
"I have long opposed government bailouts for individuals and corporate American alike," said Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee. "We have been given no credible assurances that this plan will work. We could very well send $700 billion, or a trillion, and not resolve the crisis."
Congress would be prudent to act quickly, said Robert Reich, a professor of public policy at UC, Berkeley and secretary of labor during the Clinton administration, but speed does not mean necessary regulations should not be included in any bailout measure.
"Timing is of the essence. Markets -- stocks, bonds and international markets for dollars -- are extremely nervous," Reich told ABCNews.com. "But this proposal is extremely flawed. It is essentially a blank check with no one overseeing just how it is to be spent. It pays to wait to have something sensible."
Reich also compared a flawed bailout to the Bush administration's more widely criticized mistakes, including the handling of Hurricane Katrina in 2005.
"If this was a different administration this would be easier. After Iraq and Katrina, you have to wonder if this administration can pull off anything this huge. Putting half the federal budget on the line is enough to make people go crazy," he said.
Gaining Back Public Trust
"There is so little public trust, that these senators and congressmen are going to have to go home and face their constituents and explain why Wall Streeters have made so much money when they have lost so much. If worse comes to worst, people are going to lose their jobs and lose out on health care. If this doesn't work it will mean $5,000 to $8,000 per family, how do you explain that?"
Given the pace at which Congress generally moves, some observers are skeptical that even with all the prodding action will be taken quickly.
"I'm not convinced that they're going to move quickly," said Kenneth Rogoff, an economist at Harvard University.
"Given the scale of the bailout and the amount of discretion, Congress can only move so quickly. This process has to be open ended with more decisions being made down the board. It is scary to consider how fast they say they want to move given the amount of money," he said.