Progressive Fears About the Bank Rescue Plan
After a slow rollout over the last few days, the administration's bank rescue plan has been released, to very mixed reviews. And this time, skepticism if not hostility has spread pretty deeply into the progressive ranks.
(Meanwhile, international markets responded positively to advance reports over the weekend, and stocks--particularly for banks--rose sharply on Wall Street this morning.)
There's an important anomaly to note in the freetings over progressives over this plan. Most of those reacting negatively favor a "temporary takeover" or "nationalization" of financial institutions. But even in this camp, there's a widespread assumption that a failure of the current plan will drive Congress in the opposite direction, towards a neo-Hooverian obsession with deficit reduction and suspension of any further public investments. Since Republicans are already pretty much down with the Herbert Hoover approach, that means a significant faction of congressional Democrats would move not towards a more aggressive approach to freeing up credit, but towards the Republicans.
Indeed, some nationalization proponents seem to think the public will move that way too, out of anger towards never-ending public subsidies of banks and other failed enterprises. In other words, one highly influential progressive point of view is that the administration must move sharply "left" or its policies will likely produce a sharp move to the "right" in Congress and around the country--led by enough congressional Democrats to thwart the administration's designs.
If nothing else, it seems to be clear that Democrats as a whole control their own destiny. The question is which Democrats will be in a position to lead one way or another once the dust has settled.
UPDATE: Matt Yglesias makes the important point that the Obama/Geithner bank rescue plan, which largely relies on existing federal loan authority, does not require that the administration immediately go to Congress for additional funds. Indeed, as Matt suggests, that may be the single most important political advantage it has over a nationalization approach. It does, of course, actually need to work.