Why $700 billion? They "wanted to choose a really large number"

I stand by my contention that Treasury Secretary Henry Paulson’s bailout scheme is among the worst proposals to come out of George Bush’s very bad presidency.

So I am glad to learn that Iowa Treasurer Mike Fitzgerald wants some questions answered before urging Congress to pass the bailout. Click the link to read Marc Hansen’s column about a conference call Fitzgerald and other state treasurers had on Thursday with acting U.S. treasury undersecretary for domestic finance.

I am no economics whiz, but I can help answer Fitzgerald’s first question:

Why $700 billion?

From his office at the Capitol, Fitzgerald listened intently, waiting for the answer that never came. And what did he get instead?

“Nothing,” he says, “other than a lot of babble.”

What’s so magical about $700 billion? Fitzgerald still doesn’t know. It’s about 5 percent of the gross domestic product, if that means anything.

“Magical” is a good word for the number, because as it turns out, they just made it up.

I know this because a few days ago, Open Left diarist fladem posted this link from Forbes magazine:

In fact, some of the most basic details, including the $700 billion figure Treasury would use to buy up bad debt, are fuzzy.

“It’s not based on any particular data point,” a Treasury spokeswoman told Forbes.com Tuesday. “We just wanted to choose a really large number.”

David Sirota has written two good pieces quoting Nobel prize-winning economists and others on why there is no crisis requiring a bailout package. Here is part 1, and here is part 2.

In an alternate universe where John Edwards hadn’t disgraced himself, he could have been an effective voice against the rush to shovel taxpayer dollars to Wall Street.

Instead, we have Barack Obama’s campaign letting Roger Altman speak for them in favor of Paulson’s scheme. That’s

the same Roger Altman who was a Clinton Treasury official when the Clinton-backed deregulatory orgy was taking place, the same Roger Altman who is now an investment banker who stands to make bank if this bailout passes, the same Roger Altman who Bloomberg notes “is advising a group of investors who are trying to prevent their shares from being diluted in the U.S. takeover of American International Group Inc.” – that is, who have a direct financial interest in Paulson’s bailout package.

Watching this train barrel down the track is quite discouraging.

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