So far, the $700 billion bailout by the Treasury Department hasn't calmed consumers, investors, taxpayers or homeowners.
Other than that, it's working great.
Treasury Secretary Henry M. Paulson Jr. announced last week that he was taking a $290 billion mulligan, essentially scrapping the Troubled Asset Relief Program.
Eight weeks after demanding the money from Congress and shoveling it furiously at banks to cover their bad debt, Paulson said his program wasn't working.
So after spending more than a quarter-trillion in tax dollars, Paulson threw a sheet over TARP. (Sorry, but at this point, laughter can't hurt).
Instead, Paulson wants to devote the remaining $410 billion toward loans for consumer credit, autos and students. He will provide the details later, when he figures out what those details are. Part of his new plan must include stronger incentives to compel banks to start lending again.
The Treasury secretary certainly should be allowed to change course when he recognized that Plan A wasn't working. But the financial rescue plan has been a panicky affair from the start, with a rapidly shifting focus from month to month.
Paulson's massive "do-over" has further eroded the public's confidence that the bailout money will be spent to good effect. Since Paulson proposed his bailout plan on Sept. 19, the Dow has dropped more than 25 percent.
Does anyone in Washington know what they're doing?
Nobody outside Washington is certain what Treasury is doing, because the promised oversight in the bailout legislation hasn't occurred yet. The law calls for a special inspector general with a $50 million budget to monitor the spending, but President Bush has yet to appoint someone to the post.
Perhaps Bush is in no rush, since Paulson's original proposal to Congress called for the secretary to have unilateral authority over the bailout, with no reviews allowed by courts or other agencies.
Eric Thorson, Treasury's inspector general, who has been trying to monitor the bailout in the meantime, told the Washington Post, "I don't think anyone understands right now how we're going to do proper oversight of this thing." Not a comforting admission, considering that more than one-third of the money is already gone.
Congress is supposed to appoint members of a special oversight panel, too, but didn't do so until Friday. The board is intended to study the impact of the bailout and report to lawmakers. The president and Congress should move faster to make sure there is monitoring of the bailout.
More broadly, the bailout program has failed to address the foreclosure crisis, which most analysts and policymakers agree is at the core of the economic meltdown.
A new approach announced by the FDIC is a good step. It would reduce interest rates for qualified borrowers so they wouldn't be paying more than 38 percent of their incomes on housing expenses; 30-year loans could be extended to 40 years with principal deferred interest-free. Treasury should support such efforts more enthusiastically.
It will take time to steer a new direction for a $14 trillion economy. But until housing prices stabilize and fewer homeowners face eviction, the broader economy isn't likely to recover. And the bailout will have been for naught.
