The "Unthinkable"?

The trillion dollar Wall Street bailout plan goes to Congress this week and, as an uninformed taxpayer, I have some questions, the foremost being what happens if we don't do it.

Believe me, it's no fun watching the Sunday morning news shows and seeing so many of the big players, all of whom are much, much smarter than me, arguing for the bailout, but not even trying to answer that question.

I'm a free marketer, myself. I believe that poorly designed, sporadically enforced regulation is worse than none at all. I was appalled by the AIG rescue. That's irrelevant now. We're being given a choice between two kinds of socialism, and that's it! This week, we have the spectacle of hundreds of thousands of Wall Streeters creeping on their bellies to Washington and begging for regulation. The first socialist choice is bailing out these institutions in order for the "system" to continue to function. In that case, we will "own" all of these mysterious assets, which we can then sell off to....well, somebody. The architects of the plan say these securities are worth something, but they don't know what. The important thing, however, is to keep the system moving because the consequences are "unthinkable".

I'm sorry, but I want to think about the unthinkable. What if we simply forgot the bailout and moved the government into the same position as these venerable banking institutions. After all, the bailout won't be any good if the system is allowed to continue at the current level of regulation. Public confidence demands an accountability that never existed before. Do we know what these new regulations are? No, not yet. We're told that comes later, after the market "stabilizes". Do we have the new regulating agencies in place yet? No, that's later too.

So what we're told is that "Main Street" Americans need these same institutions in order get get the loans and credit to keep a roof over their heads and their businesses afloat. But why? What is the private financial sector offering that inspires confidence in them at all? After all, they are insolvent now. If they have no real money to offer, what do they have?

I think nothing. The fact is, the regulatory system we need doesn't exist yet. It will come from Congress, and we'd better not try to coast along on the present system without it. That fact leads to a different conclusion.

Let the government -- at least temporarily -- assume the role of direct lender, and demand real collateral for new loans. We can start with the trillion dollars we are NOT using for the bailout. That means a plain direct relationship, debtor to creditor, with no gourmet "derivatives". No bonuses, no CEO parachutes. Just common civil servants providing direct financial assistance to borrowers. After all, the amount of regulatory oversight we'll eventually have, even with the bailout, will have government fingerprints on every transaction. Lots of them.

So what about that "unthinkable"? What will happen to the "Main Street" economy if we don't do the bailout?

I don't know. But I do know that the "experts" have not convinced me the bailout is necessary to prevent disaster. Everything I've heard from them leads me to think the disaster is already here, but it's too important to preserve the current financial system to let it fail.

But face it. IT HAS FAILED!

Without the bailout, debts will be unpaid, many financial institutions will go under, and the cost will be phenomenal.

I say, that's why we have bankruptcy judges. Let the creditors and stockholders line up and salvage what they can.

In the meantime. let the taxpayers use that trillion dollars to keep the economy moving until a legitimate financial system is established, one with pro-active enforcement powers.

"Main Street" will feel pain, to be sure, but not as much as the "immortals" on Wall Street. But isn't that better than what this as yet undrafted "rescue plan" offers us?