Robert Stein 1924-2014

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Saturday, October 11, 2008

Bush's About-Faces

After seven-plus years of stubborn certainty, the Decider suddenly reversed himself today on two major issues--the $700 financial bailout and relations with North Korea.

In a deathbed conversion to consensus, the Administration stepped back from the Paulson Plan to buy toxic mortgage-backed securities and moved toward injecting capital directly into the nation’s banks, a position it opposed during two turbulent weeks of persuading Congress to pass the original bill.

Since then, the meltdown of financial markets has sounded a resounding "no" to the Paulson Plan and, at the start of today's Washington meetings of world financial leaders, President Bush indicated with customary vagueness that the US would follow the lead of Great Britain, which took action this week to unlock credit markets by putting money into banks and guaranteeing loans between them.

Details will differ from country to country but, as Paul Krugman has pointed out, the "rescue announced by the British government this week provides a useful template. It offers to insure up to about $425 billion worth of new bank debt, forces banks to raise new equity capital and makes government money available to buy equity."

Growing accord toward international sanity may very well calm market panic next week and begin to restore order after all the impotent flailing around here and abroad.

On the foreign policy front, the Bush Administration took a wheel off "the axis of evil" by quietly removing North Korea from its list of states that sponsor terrorism.

State Department Sean McCormack announced that the two countries had reached agreement "on an number of important verification measures" of North Korea's nuclear program, including access for the UN nuclear watchdog agency to all of North Korea's nuclear facilities.

This sudden outbreak of sanity in Washington, if it continues until January, may simplify some of the work that a new Administration will have to do to clear away the wreckage of the past eight years.

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