The bailout as a hellbound snowball

Okay - so looking at the bailout deal (or the summary) it's looking like some good thought was put into it. The summary skirts a rather big item (IMO):

Section 112. Coordination With Foreign Authorities and Central Banks.
Requires the Secretary to coordinate with foreign authorities and central banks to establish programs similar to TARP.

When you go to the actual bill, you don't get much more detail:

SEC. 112. COORDINATION WITH FOREIGN AUTHORITIES AND CENTRAL BANKS. The Secretary shall coordinate, as appropriate, with foreign financial authorities and central banks to work toward the establishment of similar programs by such authorities and central banks. To the extent that such foreign financial authorities or banks hold troubled assets as a result of extending financing to financial institutions that have failed or defaulted on such financing, such troubled assets qualify for purchase under section 101.

That's the entire section of the bill dealing with Treasury's powers to buy "troubled assets" from foreign firms.

Meaning, the Secretary of the Treasury can prop up companies that are overseas. What he can do here, he can do anywhere.

That's comforting.

Much will be made of the scaled back numbers. "It's not $700 billion right off the bat."

No, it's $250 billion right off the bat. But if the President certifies that the Treasury needs it, another $100 billion is released immediately. If the President issues a written report that more money is needed - congress has 15 days to vote to disapprove his request or another $350 billion is released.

I'd like to believe congress could put the brakes on this president, but since they've utterly capitulated on every other issue of note - I'm not so sure this limitation is much to crow about.

$250 billion now, $100 billion on request, and $350 billion in 15 days.
Mind you, I'm not critiquing the size of the amount, only the value of a "compromise" that adds up to exactly the amount the administration asked for.

Even I can do that math.

For a dose of perspective, here's WaPo. They' do math, too - only better:

The goal is not to vacuum all the industry's troubled assets into a federal holding tank. Rather, the government wants to determine credible prices for the assets held by banks, through the mechanism of buying some of those assets. If the plan succeeds, the prices paid by the government will become a new market standard, bridging the current gap between the higher prices sought by banks and the lower prices offered by investors.

"We need confidence, and this is about confidence," Paulson said.

In a practical sense, the government is trying to revive the markets because buying up all the troubled assets would require far more than $700 billion.

Twenty of the nation's largest financial institutions owned a combined total of $2.3 trillion in mortgages as of June 30. They owned another $1.2 trillion of mortgage-backed securities. And they reported selling another $1.2 trillion in mortgage-related investments on which they retained hundreds of billions of dollars in potential liability, according to filings the firms made with regulatory agencies. The numbers do not include investments derived from mortgages in more complicated ways, such as collateralized debt obligations. 

Cross your fingers, folks - this is close to a trillion dollars acting as a diversion.

Let's hope this works. Or it's good money after bad.