What to make of Obama & Co.'s bank bailout - on top of Bush & Co.'s earlier bank bailout - which in terms of government spending and debt could add another 12 zeroes behind the 1 at the top of the pile?

What to make of Obama & Co.'s bank bailout - on top of Bush & Co.'s earlier bank bailout - which in terms of government spending and debt could add another 12 zeroes behind the 1 at the top of the pile?


Well, Wall Street liked it, as evidenced by the Dow's big rally early in the week and its upbeat mood since. While we welcome that rebound and hope it's a sign of things to come, forgive us if Wall Street's instincts sometimes make us nervous. We long ago lost our faith in the so-called "experts" having any unique knowledge of whether this or that solution will get the job done. If there are people with pitchforks in the streets, it's because Wall Street's interests have not always coincided with Main Street's, over the long haul.


The plan got mixed reviews from economists. Essentially it has Treasury Secretary Tim Geithner piggybacking on what his predecessor Hank Paulson initially thought about doing before ultimately backing off. That is to spend "cash for trash," to provide loans - of at least $500 billion but possibly $1 trillion or more - to private investors to buy up the bad assets, then keep fingers crossed that this unfreezes the lending markets and the value of those assets grows, thereby allowing the borrowers to pay back Uncle Sam, with interest.


One problem is that the proposal favors private investors at the expense of taxpayers - again - by dropping the overwhelming majority of the risk, easily 90 percent, in Uncle Sam's lap. Meanwhile, it requires the involvement of investors who are looking for bargains on these toxic assets - reportedly down to 30 cents on the dollar - with many banks unwilling to go that low.


Even the liberal New York Times was critical of this Democratic proposal, arguing that some of these financial institutions are insolvent beyond repair, that this economic downturn is real and not just the result of irrational panic, that this is a halfway scenario that puts the solution neither fully in the government's hands nor the free market's, thereby dooming it. Some think Obama and Geithner need to go all the way with a Resolution Trust Corporation-type of mechanism that has the government separating the hopeless banks from the salvageable ones, taking the former over and cleaning up their books, as it did 20 years ago with the derelict savings and loan associations.


Who knows? Clearly it's another gamble. The early returns have been positive. For the first time in what seems like forever, February even produced some better-than-expected news on the home starts and factory orders fronts, though it's probably unwise to read too much into that.


Meanwhile, Geithner on Thursday announced plans to rein in some of the more aggressive elements on Wall Street - hedge funds, private equity funds, venture capital funds, financial derivatives - with far stricter government supervision, "not modest repairs at the margin, but new rules of the game."


While we are wary of an all-powerful government stifling free enterprise, so are we concerned about an unfettered market that has proven its willingness to go crazy when nobody is watching. These are, after all, the kinds of entities who manage our pensions. If you want to blame somebody for Uncle Sam's heavy hand here, feel free to blame the likes of a crook like Bernie Madoff.


Finally, Geithner wants far greater government oversight over "systemically important" banks and other institutions. We do think the government has a role here in putting up some hurdles to companies becoming "too big to fail." An AIG shouldn't be able to topple an entire economy, though it's fair to wonder if it actually would have, had AIG been allowed to fail.


Look, no one likes this stuff, not even Geithner. As he said, these proposals "contain a basic and tragic unfairness - that those who were prudent and responsible in their personal and professional judgments are harmed by the actions of those who were less careful and less prudent." It galls us no end when taxpayers are called upon to rescue the bad guys.


That said, there are precious few good choices here. Absolutely, we are concerned about the borrowing, especially when we have gone in a relatively short time span from thinking billions meant big money to trillions and, this week in the Wall Street Journal, even a mention of "quadrillion" in reference to the value of the complex derivatives that are in part behind this mess. Certainly we hope the Obama administration knows when to say when. We don't have that sense yet.


And somewhere along the line, we have to get back to the concept in this country that our wealth should come first and foremost from our work, not just from our investments.


Peoria Journal Star