Nobel Laureate Joseph Stiglitz: Bail Out Wall Street Now, Change Terms Later

The Senate has endorsed a revised version of the $700 billion Wall Street bailout plan. The legislation was easily approved last night on a 74 to 25 vote with a majority of Democrats and Republicans voting in favor—among them presidential nominees Barack Obama and John McCain. But the measure faces a tougher test tomorrow in the House, where Congressional leaders will try to reverse the stunning defeat the legislation suffered earlier in the week.

The centerpiece of the bill authorizes the government to buy billions of dollars of troubled assets from financial institutions rocked by record home foreclosures. The original proposal has been heavily revised to attract wider support from lawmakers. The bill passed last night includes $150 billion dollars in tax breaks for individuals and businesses. It also temporarily raises the limit on federal bank-deposit insurance from $100,000 to $250,000.

The changes in the bill were measurable by volume. The initial proposal from the Treasury Department ran just three pages; the latest version exceeds 450 pages. Some of the changes appear aimed at enticing specific lawmakers to change their votes from no to yes. For example, the bill now includes a provision to boost insurance coverage of mental illness, a priority of Minnesota Republican Jim Ramstad who voted against the bill on Monday. It also includes a tax benefit for bicycle commuting sought by Oregon Democrat Earl Blumenauer, also a no vote on Monday.

Congressional leaders are hoping to win over at least the dozen or so votes needed to reverse Monday’s outcome and send the measure to President Bush.

Joseph Stiglitz is the winner of the 2001 Nobel Prize in Economics. He is a professor at Columbia University and the former chief economist at the World Bank. He is the co-author of “The Three Trillion Dollar War: The True Cost of the Iraq Conflict.” Joseph Stiglitz joins us on the telephone from Europe.

Joseph Stiglitz, winner of the 2001 Nobel Prize in Economics. He is a professor at Columbia University and the former chief economist at the World Bank. He is the co-author of The Three Trillion Dollar War: The True Cost of the Iraq Conflict. <

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