When Is A Wall Street Bailout Not A Bailout?

When it's a couple trillion dollars of "insurance".

What do House Republicans want? A senior House Republican gave me and some other reporters a look yesterday at what a working group headed by Assistant Minority Whip Eric Cantor is demanding. The senior House Republican (hereinafter SHR) has what sounded to me like an ingenious approach. He cited Ginnie Mae loans to low-income borrowers, which the government can insure. He proposed that the government (presumably through the entity envisioned by the Paulson plan) offer to sell insurance to financial institutions that hold mortgage-backed securities (hereinafter MBS). Premiums would be determined by the rates of foreclosure on each class of securities so far. Under this plan, the government would be taking in money, not paying it out. Of course, if the premiums are not enough to cover losses, the government might eventually take losses, as it did when the savings and loan industry collapsed. But losses don't seem inevitable and in any case will mostly occur in out-years, not now.

Lemme 'splain this to ya.

What Eric Cantor and the House GOP want to do with their See It's Totally Like Magical Lightsaber-Throwing Jedi Ninja Riding Cyborg Fire-Breathing Velociraptors Plan, Dude here is this:

1. Wall Street companies get to buy insurance against blowing the hell up.
2. Taxes are lowered and regulations are relaxed so that companies will have the money to pay the premiums.
3. If the company blows up, they get a crapload of taxpayer money only it's not called that. They actually MAKE money.
4. If the company does not blow up, they still make money because they can write off the premiums, AND since the GOP lowered taxes to free up the money for the premiums in the first place, they STILL make money.
5. The only people who do NOT make money are the taxpayers, especially since hey, all these companies are going to blow up anyway.

Great plan, huh?

So I asked the SHR whether a commitment by Paulson to consider an insurance program would be enough to win over a significant number of House Republicans. He said that a hazy commitment would not be enough, with the implication that the bill would still seem to House Republicans to be a Wall Street bailout with the implication that the government would be shelling out $700 billion of taxpayer money. I followed up by asking whether House Republicans would go along if Paulson pledged to use authority in the statute to set up an insurance program within a month of passage. "That would go far toward convincing [Republican] members," the SHR said. In other words, the insurance option may be the way to save this legislation.

...and then McSame takes credit for it and says "My friends, that's bullshit we can believe in."

It's all about the packaging. Calling Dems: Smash this in the chops, please.