Don Luskin reluctantly supports the bailout plan, but he doesn’t like it (via NRO):
To arrive at a principled view on this intervention, we must answer three critical questions: Is it necessary? Will it work? And even then, is it morally justifiable?
Lusking thinks the size of the request is too large:
Even if you grant that this really is a “crisis,” and that it justifies an extraordinary intervention, there can be no doubt that the $700 billion authority being sought for the purchase of distressed mortgage-related securities is far too great an amount. Of the $1.26 trillion in non-prime mortgages – that is, “sub-prime” and “Alt-A” mortgages – $743 billion is already either owned or guaranteed by Fannie Mae and Freddie Mac, companies that were shored up by a government rescue earlier this month. That leaves $521 billion, which means the Treasury’s $700 billion would be more than enough to buy them all. And that’s even if the Treasury paid full value. In fact, the Treasury will get a steep discount, considering that many of the mortgages in question are in delinquency or default. Does the Treasury really have to buy every single non-prime mortgage – even the healthy ones – twice over?
That’s hard to argue with if his math is right.
It also seems at first blush that the government ought to not bail out banks that made terrible investments they now regret. But remember, many of these bad investments were the result of government meddling. Would we be experiencing a sharp housing downturn, and a wave of mortgage defaults, if the Federal Reserve had not created a housing bubble and a mortgage bubble in the first place by artificially lowering interest rates to 1 percent in 2003 and 2004? And how much was the housing bubble inflated by the highly leveraged mortgage buying spree of government-sponsored and government-influenced Fannie Mae and Freddie Mac? Shouldn’t the government shoulder some responsibility for its own mistakes?