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    Repiglican Roast

    A spirited discussion of public policy and current issues

    Name:
    Location: The mouth of being

    I'm furious about my squandered nation.

    Thursday, September 25, 2008

    director of the Congressional Budget Office said yesterday that the proposed Wall Street bailout could actually worsen the current financial crisis.

    [...]

    In an interview later yesterday, Orszag explained using the following example: Suppose a company has Asset X, whose value is recorded on the books as $100. Because of the current economic decline, Asset X's real value has dropped to $50. If the company takes part in the government bailout and sells Asset X for $50, the company has to report a $50 loss on its books. On a scale of millions of dollars, such write-downs could ruin a company.

    Such companies "look solvent today only because it's kind of hidden," Orszag said. "They actually are insolvent" already, he said.

    In hearings on Capitol Hill so far this week, criticism of the bailout plan put forward by Treasury Secretary Henry M. Paulson Jr. and Federal Reserve Chairman Ben S. Bernanke has largely been restricted to the shape of the $700 billion proposal, how the money will be spent and what sort of oversight Treasury should have.

    But Orszag yesterday questioned the wisdom of the plan itself, testifying that "it therefore remains uncertain whether the program will be sufficient to restore trust."

    In yesterday's interview, Orszag said, "The key question is: What are we buying and what are we paying for it?"

    [...]


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