Have you read the text of the Bush Administration’s proposed 700 billion dollar bailout of financial institutions?  If you don’t want to wade through the three-page proposal (although it is written in reasonably clear English), this summary will tell you all you need to know.  (Thanks to David Stafford for the link.)

When that proposal was presented, Congress was given the opportunity to exercise its most important obligation under the Constitution:  to serve as a check on the Executive branch.  Were Congress seriously interested in doing what’s best for the economy, for the taxpayers, and for the country, they would have just said, “No.”  Instead, they view the proposal as a starting position and are taking this opportunity to ingratiate themselves with their constituents and extend government’s control over private lending.  You doubt that?  Consider:

• Democrats are pushing for legislation that allows bankruptcy judges to rewrite mortgages to “ease the burden” on homeowners who are facing foreclosure.  This contentious issue probably will be dropped in favor of getting a bill passed.
• Democrats want any proceeds of the bailout to go into a fund designed to pay for housing for poor families.  This is the old shell game.  On one hand, they’re telling us that we’ll “get back” much of that $700 billion when the assets are sold.  The reality is that any proceeds will go into the general fund, which Congress can squander at their whim.
• Lawmakers on both sides have agreed in principal to limit pay packages for executives whose companies benefit.  This is largely a symbolic move, as executive pay is a drop in the bucket compared to the amount of money we’re discussing.  But it looks good to the voters.  “I voted to limit executive pay!”
• Absent the “No” that they should give, Congress is right in insisting that it be given more control over the bailout than what the proposal allows.  But I doubt that they’ll exercise restraint.  I fear that they’ll make a serious power grab.  For example, Representative Barney Frank has said: “we’re now the biggest mortgate holder in town, and we can do serious foreclosure avoidance.”  That frightens me, as I think it should frighten anybody.

I’m not convinced that this bailout is at all required.  Were Congress to do the right thing—nothing—markets would take an immediate tumble, rebound a bit, and then financial institutions and others affected would get back to business.  Sure, it’d be a struggle.  But the relatively short-term pain involved will be much less than the long-term pain that this bailout legislation will undoubtedly cause.

Needed or not, I’m certain that it doesn’t have to happen within the next week, as Secretary Paulson and Federal Reserve Chariman Bernanke insist.  I’m always nervous when Congress acts at all, and I get very, very scared whenever Congress rushes through legislation to “address a serious problem.”  Eight years of an administration and a Congress that have both lost all concept of the term “fiscal restraint” has taught me that much.