EOD

You get the feeling that Sec. Paulson and co. are like action heroes leaning over a rapidly ticking time bomb:

Cut the red wire?

the blue wire?

Cut everything? 

Just run???

The NYT (via TPM) is reporting that the great minds over at Treasury are reconsidering their original plan of buying crap securities:

Treasury officials say the just-passed $700 billion bailout bill gives them the authority to inject cash directly into banks that request it. Such a move would quickly strengthen banks’ balance sheets and, officials hope, persuade them to resume lending. In return, the law gives the Treasury the right to take ownership positions in banks, including healthy ones.

The Treasury plan was still preliminary and it was unclear how the process would work, but it appeared that it would be voluntary for banks.

The proposal resembles one announced on Wednesday in Britain.

I'm glad they're looking at other options. But two cheap shots occur to me:

1) If this plan resembles Britain's, I'm wondering if there has been some collaboration on this - and how widespread it is. Mind you, I'm happy that we'd look for help from wherever we can get it.

But does it make anyone else nervous that world leaders might be coordinating their response because this mess is so much worse that what we've seen so far?

I'm flashing back to This American Life where they mention that the global pool of money - that is, all the world's savings - is around 70 trillion dollars. According to 60 Minutes the other day, nobody knows the total value of the Credit Default Swap market - but a voluntary survey of bankers put it around 60 trillion dollars. CDS's are essentially insurance on securities. They are not regulated, so someone like AIG can sell them without having to have the cash to back them up.

Since so many mortgage backed investments and CDO's are tanking - investors are calling on their CDS's to save them. Calling on CDS-selling companies like Bear Stears who (lacking the cash) promptly go under.

Now, not all CDS's are going to get called in - but if there's 60 trillion dollars worth of them out there, it won't take a huge percentage of them failing to cause a staggering amount of financial carnage.

2) This one is more basic. The NYT is reporting that the Treasury is considering this change in plan - and while they've done a great job - it's clear the details are pretty sketchy.

In other words, having given $700 billion dollars worth of authority to the Treasury Secretary, we're all guessing what he might be up to:

Will he cut the blue wire? the red wir?

-because we have no idea what he's going to do. With $700 billion dollars.

For a democracy, that's pretty sad commentary on how this country is doing things.