“Give Paulson a Clean Bill” by Larry Kudlow

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John McCain met with Cisco CEO John Chambers, former Massachusetts Gov. Mitt Romney, former eBay CEO Meg Whitman and former Merrill Lynch CEO John Thain.

Keep France and Soviet-style policies out of the rescue plan.

Honestly. A clean bill as requested by Treasury man Henry Paulson, along with John McCain’s oversight board, can help fix the credit-crunch problem. It needn’t be this hard.

According to the Paulson plan, distressed assets will be sold by banks through a reverse auction (the low bid wins) to various investment funds, hedgies, private-equity boys, and other banks. And taxpayers will have a strong ownership position in these asset sales. When the assets are worked out over time — as they will be once housing and the economy recover — taxpayers will actually make money on the deal.

This is similar to the RTC story twenty years ago, when Bill Seidman presided over similar asset sales from bankrupt S&Ls and wound up making money for Uncle Sam and his taxpayers. A long prosperity wave followed.

In fact, industry insiders tell me the Federal Reserve and the SEC may be moving toward a five-to-seven year amortization plan for the scoring of bank losses from the sale of this distressed paper. This is very constructive. Fed head Ben Bernanke also is talking about getting rid of mark-to-market accounting and moving towards “hold to maturity.” This is good.

But the credit arteries are now clogged with a terrible virus that can be removed by the Paulson rescue plan. And as the problem is solved, credit and loans will be made more available to Main Street homeowners, small businesses, and consumers of every type. Credit markets will gradually unfreeze. It can be done. A deep recession can be avoided.

And maybe along the way we can get a strong King Dollar to fight inflation and attract international investment. And perhaps, just perhaps, we can get more drilling to reduce gas prices at the pump — a big recovery tonic. And, dare I hope, maybe we even can get corporate tax reform with lower tax rates, which along with energy deregulation will spur jobs and wage growth.

See also:

http://uk.reuters.com/article/topNews/idUKTRE48N4VM20080924

NEW YORK (Reuters) – Republican presidential nominee John McCain got an update on the Wall Street financial crisis from several economic experts on Wednesday and was cautious on whether he would vote for a $700 billion (377.5 billion pound) bailout.

The Arizona senator said Senate Majority Leader Harry Reid, a Nevada Democrat, was wrong to say on Tuesday that McCain planned to vote for the hotly debated rescue plan.

“I did not say that,” McCain told reporters. Later, top McCain aide Mark Salter added: “He hasn’t said that to (Treasury Secretary Henry) Paulson or to Reid or to anybody else. He hasn’t said that to me.”

McCain’s comment came as he met with several economic experts and current and former corporate executives, such as Cisco CEO John Chambers, former Massachusetts Gov. Mitt Romney, former eBay CEO Meg Whitman and former Merrill Lynch CEO John Thain.

Neither McCain nor Democratic rival Barack Obama has said he would oppose the plan being negotiated with Congress, although both have been critical of it. Both are jockeying for position to try to project to voters strong leadership during the crisis, six weeks before the November 4 election.

“Most Americans feel very strongly that this isn’t their fault but it’s Wall Street and Washington and the cosy insider relationships that have caused a great part of the problems,” McCain said.

He said any package must have “transparency, accountability, CEO responsibility and obviously be in the best interest of the people (of) this country who are going to pay $10,000 per household in order to take the necessary measures to restore our confidence.”

While Obama was in Florida getting prepared for his first debate with McCain on Friday in Mississippi, McCain was engaged in a round of meetings with foreign leaders in New York on the sidelines of the U.N. General Assembly.

The list included a joint session with the presidents of Georgia and Ukraine, both of whom are concerned about Russia after Moscow’s invasion of Georgia last month. He was also to meet Indian Prime Minister Manmohan Singh.


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