COMMENTS: New Deal from the Treasury Department

Another day, another financial headline. The focus shifted from the Federal Reserve Board to the Department of the Treasury as Secretary Henry Paulson was expected to announce a plan to save financial capitalism from collapse--a federal fund to relieve banks of a mountain of debt in order to free them to resume offering credit to one another. On Wall Street, traders responded with a buy signal. The Dow Jones Industrial Average rose 410 points to 11019. ABC and CBS, with Harry Smith co-anchoring with Katie Couric, made the stock market angle their headline, the Story of the Day. NBC chose the more difficult to explain, but more important, prospect of the Treasury plan as its lead.

CNBC's Carl Quintanilla called Paulson's plan "shock and awe" in his report for NBC. It would create "a government entity that would buy all those troubled mortgages and, like a sick patient, put them in quarantine and sell them off later, allowing banks to clean up their books and start lending money again." Betsy Stark on ABC used a medical metaphor too: "It would be surgical. It is like cutting the cancer out of the patient and trying to put it on the road to recovery."

Moving from the Federal Reserve Board to the Treasury "would require Congressional legislation," CBS' Anthony Mason pointed out. ABC anchor Charles Gibson turned to George Stephanopoulos, host of ABC's Sunday morning talkshow This Week, to assess the political popularity of any bailout for financiers. Stephanopoulos predicted that Democrats would insist that "direct aid to taxpayers and consumers" be added to make it palatable. His examples included a second round of stimulus checks, unemployment benefits, funding for food stamps and assistance for home heating this winter. "This is really going to add up into the hundreds of billions, eventually maybe more than $1tr."

CNBC economist Steve Liesman weighed the consequences of such a massive expenditure on NBC: "Some people would say that this creates a danger--taking on all this bad debt--of the United States becoming a banana republic. I think those proponents of this plan would say that by losing our banking system, and maybe even Wall Street the way we are going, we would be that much closer to being a banana republic!" To which anchor Brian Williams exclaimed: "Wow!"


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