The Bailout Plan: Hank Paulson and Ben Bernanke's Bogus Journey

Prudence is no longer a virtue.

That's the message coming from supporters of the Paulson bailout plan—including Democratic leaders like Chris Dodd and Barney Frank who want to make a few (important) modifications but keep the basic plan intact.

Warren Buffett says that the plan is akin to the U.S. response to Pearl Harbor. Don't think—just fight back.

Henry Paulson and Ben Bernanke are annoyed at Congress for having the gall to actually debate the plan.

The real cherry on top came when Frank made this truly jaw-dropping statement (hat tip to the Agitator):

I think we have to recognize the reality that we don't have a choice now of debating whether this is a good or a bad thing.

Excuse me? Do you remember one of the last times Congress enacted legislation that was deemed too important to actually debate—or even read? The funny (and sad) thing is that this bailout plan as originally conceived contains massive deference to the executive branch in ways all too familiar to that historic legislation.

So why wait? Well, it turns out that there are tons of reasons. They all revolve around one central point: We don't know how much good this plan will really do for the American small businesses and consumers who will pay its massive price tag.

• Alex Tabarrok at Marginal Revolution points out that the evidence is not yet all in to show that the credit crunch has even really expanded beyond the short-term, asset-backed securities. If that's the case, why not hold onto the cool $700 billion and save it for when we actually do see a broad credit crunch for consumers and businesses, instead of bailing out the middleman? Tom Brokaw has an interesting op-ed that is kind of making the same point: There are plenty of small businesses that could use the money directly. I'm not sure if he explicitly is calling for that kind of bailout, but the point stands that there's no clear evidence that such a bailout would be any worse than bailing out the large banks, as Paulson would have it.

• There are some interesting proposals for alternative measures that could save the financial system and economy from unraveling without the massive expense of Paulson's plan. Sweden was able to bail out its ailing financial system in the early '90s at a price lower relative to its GDP.

• Finally, Dawn Rivers Baker explains in simple terms the problems with the moral hazard this bailout could create. If the plan doesn't work, it could make things worse in the long run.

I'm not bringing these points up to say that nothing should be done and that we should let the problems sort themselves out. Smart people like Megan McArdle have explained that the consequences of doing nothing are likely to be horrific. But that uncertainty is all the more reason to carefully go over all the options and figure out the right response. Let's not just implement the first thing onto which Buffett stamps his approval.