Two Bills of Interest Advancing In Congress

pgn674 writes "While the Emergency Economic Stabilization Act of 2008 failed to pass in the House of Representatives, two other bills of interest to this community are currently moving through the US lawmaking process. One is the Broadband Data Improvement Act, which Communications Workers of America claims will help us towards bringing high-speed Internet access to all Americans. It will have the FCC increase their granularity in reporting the Internet accessibility of an area in the US, and redefine broadband measurements. It has passed through the House and the Senate, and differences in the passed versions are currently being resolved. The other bill is the Webcaster Settlement Act of 2008. Pandora is excited for this one as it will give them time to negotiate with SoundExchange (i.e. the RIAA) for new, more affordable royalty rates. The bill is currently in the Senate, and is expected to pass with ease."

Comments

On the Bailout plan

[InvisblePinkUnicorn]

To inform yourself about what is wrong with the bailout, and what caused the crisis in the first place, read these two excellent articles:

Economist: Why Bankruptcy is Better than Wall Street Bailout

The Trillion-Dollar Bank Shakedown That Bodes Ill for Cities ( written EIGHT YEARS before this crisis , predicting everything down to the dollar amount)

Re:On the Bailout plan

[megamerican]

How to fix it?

Get this piece of legislation out of committee and just maybe we have a chance to turn this country around.

Re:On the Bailout plan

[cayenne8]

"Without the Federal Reserve? No wonder no one voted for that crackpot in the primaries."

Well, there are some pretty good arguments put forth, that the Fed. should never have been put in place...it is not a constitutional body, in fact some argue it is actually against what the constitution says with regard to issuing/printing money.

Re:On the Bailout plan

[cayenne8]

"In stead of bailing out wall street directly, why not help them indirectly? With a bail out of $700,000,000,000, they can pay toward mortgages, up to a limit, for people who are in standing; since say January. People with paid off mortgages suddenly have new disposable income which can go back to both main and wall streets. Paid off mortgages means no more for closures. Better yet, it creates cash flow back to the banks, making them solvent again without rewarding them for them criminal behaviour which created this whole situation in the first place."

But paying off people's mortgages isn't fair...especially to those who were fiscally responsible and didn't buy homes they could not afford!!

What of those people that have been out there, saving for a home they could afford...waiting for housing prices to adjust to more reasonable levels....you actually want their tax dollars to pay for people who jumped in over their heads and pay off their houses?

That is just not fair. No, the govt. isn't there to bail you out of personal stupidity, let those houses be sold, when the price is reasonable, people that are responsible fiscally, that are good credit risks, will be there to buy them back off the market.

Hell, if anyone had known the US gov. would be buying houses...then everyone would have jumped into the market, and gotten in to wait for the free payoff. That just isn't fair, and would be rewarding bad behavior.

Re:On the Bailout plan

[GooberToo]

What of those people that have been out there, saving for a home they could afford...waiting for housing prices to adjust to more reasonable levels....you actually want their tax dollars to pay for people who jumped in over their heads and pay off their houses?

Re-read what I said. You're 180-degrees off from my position. I specifically avoid rewarding the people that caused this whole situation. The people being rewarded are those that did everything right, which in turn brings money back to the banks so they can mitigate their losses. In other words, it rewards people like you and me. Those that bought more house than they can pay for are still left to deal with the banks.

In other words, if you did the right thing then you get rewarded, which helps bail out the banks. If you did the wrong thing, contributing to this problem, you still have debt to pay; which the banks will still feel. What this does is it helps make the banks solvent again, defers payment for some, and pays off houses for others. Best of all, the banks are not rewarded for fraud and neither are the fraudulent home owners.

You can further qualify this by home owners who have owned their home for five or more years and are still in good standing since January of this year. After all, we don't want to punish people who are suffering because of the economic woes brought about by the fraudulent activity. So on and so on. You get the idea. In other words, qualify who is reward so as to exclude those that caused this problem in the first place. The banks suddenly have cash which allows them to be solvent again yet they must still deal with the ramifications of their own poor business practises. In short, they are still going to take a loss; but a survivable loss.

This proposal is leaps and bounds better than rewarding the banks for fraud; which ultimately is trickle down theory, which we know doesn't work to kick start the economy. At least my plan makes sense. Their plan is rewarding the rich and powerful for fraud while doing nothing to stimulate the economy - unless you consider wall street to be the economy - it is not.

And to be absolutely clear, wall street has lost 10%+ on many historic occasions before. This is not the first time. The sky is not falling. The recent fear mongering is an attempt to pass the charity which is only good for the rich and powerful.

Legislation is not free

[Chairboy]

What's the deliverable for things like the 'Broadband data improvement act'? Nothing, as far as I can tell, except some congressional reports about which areas of the country have high speed internet access. This is data that should be collected by the companies looking to know where to invest. That's how commerce works.

The cost? $40 million a YEAR. http://www.cbo.gov/ftpdocs/85xx/doc8587/s1492.pdf

This isn't $40 million out of the ether, it's YOUR money (if you're a US taxpayer, anyhow).

What in blue blazes are we doing? The economic crisis we're in is multi-faceted, and mad crazy spending is a big component, both privately AND governmentally.

Re:Legislation is not free

[explosivejared]

Well this is the whole problem. We have adjusted to having such easy access to credit and capital and money in all its forms that once the credit markets seized up, the resulting deflationary pressure would be multiplied and reek havoc. The thing about the market though is that it sort of gets itself into spirals, or apparent spirals, where the exact thing that caused a problem is what we expect to solve it. Inflation of the currency and ungodly overspending results in a deflationary bomb, well the only thing that can save us is... uh more inflation of the currency and more ungodly spending. Maybe pork is the cure? I don't know anymore.

Re:Legislation is not free

[CrimsonAvenger]

The cost? $40 million a YEAR. http://www.cbo.gov/ftpdocs/85xx/doc8587/s1492.pdf

This isn't $40 million out of the ether, it's YOUR money (if you're a US taxpayer, anyhow).

It's peanuts. My family's share is forty cents. I'll pay it, just for the information, which ought to be available under the Freedom of Information Act.

Remember, the ISP's and such really don't have much interest in expanding access to broadband.

Not because they can't, but because they don't see a return on the required investment as ever paying off. Because it won't. Very few people are going to be willing to pay more for faster access - the few who do already are, the vast majority of internet users are still just doing web browsing and email, which really doesn't improve all that much with faster broadband.

Now, if the information gathered under this Bill results in a broadband equivalent of the Rural Electrification Act, it'll be a good thing. Annoying, to have my broadband rates raised to pay to provide broadband to the areas it isn't provided, but worth it, in the big picture.

Re:Legislation is not free

[lysergic.acid]

investing in infrastructure isn't "mad crazy spending."

communications networks are already heavily subsidized, at least this will ensure that such investment is providing adequate returns. if a particular provider is not providing return value on this public investment, then they should not continue to be subsidized. likewise, these reports will allow statewide grants to be used more efficiently/effectively by focusing attention and resources on areas that are lagging behind in broadband infrastructure.

the ideal solution for this type of infrastructure is to nationalize it, but create a decentralized structure similar to the Department of Education. funding and general development goals/initiatives are set by federal and state level government, but each area's ISP and local infrastructure (like municipal wi-fi) should be managed by municipal governments.

subsidizing commercial corporations doesn't give the public any control over the management of vital public infrastructure. this has been demonstrated with the telecoms, and again with ISPs. we pay for the infrastructure, but they still charge us extortionate prices made possible by their natural monopoly.

with public utilities, which are always natural monopolies, the only ways to protect public interest is through industry regulation or have the government provide the utility. but with a pro-business government that is constantly pushing for industry deregulation, subsidizing private industries is not a viable option. so the only real way to establish a communications infrastructure which serves public interest rather than corporate interests, is to nationalize our communications infrastructure and provide broadband access through locally-managed municipal wi-fi.

Re:Legislation is not free

[Firehed]

Very few people are going to be willing to pay more for faster access - the few who do already are, the vast majority of internet users are still just doing web browsing and email, which really doesn't improve all that much with faster broadband.

That may be true today, but once you start considering high-bandwidth content (480p+ video, etc) and it's rapid growth since the availability of broadband, the demand for even faster connections will absolutely go up. With companies like Apple, Amazon, and even NBC completely legitimizing the practice thanks to iTunes, Unbox, and Hulu respectively and indeed pushing their online services, the need and desire is there. Granted NBC and the other big TV companies are a lot slower to adopt, but they are catching on and they have a hell of an influence once they REALLY start pushing it.

Of course the ISPs would absolutely hate this. Not only would it increase their bandwidth and infrastructure costs, but many of them are also TV service providers (all of the cable ISPs, and probably some of the bigger DSL companies) and that would directly target not only their cable revenues but also other services like TiVo. This heads towards the whole net neutrality issue, since content-providing ISPs would without question have financial incentive to throttle (for example) Youtube and Revver in favor of either Hulu/etc or their own tv.comcast.com type of thing.

Re:Legislation is not free

[jlarocco]

I'm not following. A lot of people don't think faster broadband is worth paying for. So the ISPs don't provide broadband in those areas. But you're saying that everybody else should be forced to pay the cost of installing broadband in those areas? Why?

It's peanuts. My family's share is forty cents. I'll pay it, just for the information, which ought to be available under the Freedom of Information Act.

If you really think it's that important, and you really consider $40 million "peanuts", why don't you fund it yourself? There's nothing stopping you. That way those of us who don't think it's worth even forty cents don't have to pay for it at all.

Re:Legislation is not free

[CrimsonAvenger]

A lot of people don't think faster broadband is worth paying for. So the ISPs don't provide broadband in those areas. But you're saying that everybody else should be forced to pay the cost of installing broadband in those areas? Why?

You should try reading with your prejudices turned off.

A lot of people don't think faster broadband is worth paying for. Absolutely true.

The ISP's don't provide broadband in those areas. Well, no. They don't provide FASTER broadband in those areas. Note the "faster", which allows the second statement to talk about the same thing as the first, unlike in your post.

That said, there are areas which have NO BROADBAND. My parents' house, as an example. It's about six miles outside town, and won't get broadband within the lifetime of the universe, if only market forces apply. Hence an equivalent to the Rural Electrification Act.

Which I support. Faster broadband for the people who already have broadband? I'm not interested in having the government provide that - if there's a demand, it'll happen. If there's not, it won't.

Re:Legislation is not free

[bill_mcgonigle]

Nothing, as far as I can tell, except some congressional reports about which areas of the country have high speed internet access.

If the Congress is going to do something about broadband deployment, they ought to at least be making decisions based on good data. Until very recently all the broadband availability reports were strictly by ZIP code, so that if somebody in a ZIP code had broadband, all residents in that ZIP were counted as having broadband available. This recently changed to ZIP+4, but the data doesn't yet exist, at least publicly. So, every statistic you've heard about broadband deployment rates is likely to be wrong, to some degree, unless it was a locally-collected local report.

If the government wasn't granting telecommunications lobbies, and the government couldn't save money by using the Internet for governance, and the government wasn't regulating any viable options away (yeah, FCC, I'm looking at you), then it would be best for them to be completely hands-off on this. That would be the best solution. But, coming out of my dream world (deferred to a future release of World), a few reports could actually be useful for deciding proper policy.

I'd much prefer this to Hank "We needed a really big number" Paulson-style legislative efforts.

Re:Legislation is not free

[jlarocco]

That said, there are areas which have NO BROADBAND. My parents' house, as an example. It's about six miles outside town, and won't get broadband within the lifetime of the universe, if only market forces apply. Hence an equivalent to the Rural Electrification Act.

That's my point. If your parents were willing to pay enough, they could get broadband. They don't think it's worth paying, so why should we pay for them?

Maybe they want it but can't afford it? Well, sucks to be them. Wanting something really bad doesn't give them the right to force other people to buy it for them. I want a Rolls Royce, a beach front mansion and a trophy wife, that doesn't mean the government should buy them for me.

Re:Legislation is not free

[Sancho]

Recessions are bad for morale, and bad morale means that the people are more likely to take an interest in those doing the governing. It makes sense for our absurd two-party system to play hot-potato with the recession. Put it off as long as possible, and hope that your party isn't in control when it hits.

Of course, informed people realize that recessions are a natural part of the economy. I guess it sucks to be born into one, but thems the breaks, right?

Re:Legislation is not free

[CrimsonAvenger]

AND raiding your neighbors' wallets for $3 a month to cover your costs. If I did that, I'd feel guilty of theft. If I live in no man's land, then *I* should be the one to pay for the cost of running the wires out to my home, not my neighbors.

Plus the additional fact the the electrification act encourages suburban sprawl which encourages environmental destruction & needless paving-over of valuable farmland.

Note that without the Rural Electrification Act, most farms would not have electricity to this day. My grandfather didn't get electricity until I was a teenager, as I recall.

Note that the REA didn't actually cause the spread of the suburbs. Suburbs are densely enough populated that it is quite profitable to provide electricity and phone service to them without the REA. The REA was for the benefit of country houses in Nebraska, Kansas, Colorado. You know, those physically large States with so few people that you need a car to visit your next-door neighbor?

Yes, I'm aware that very few /.ers are aware that people still live in the country. Fact is, the food you eat was pretty much grown by people who live in the country. Mostly far enough out in the country that they'd have no phone service and no electricity without government intervention.

Don't know about you, but I'm not terribly bothered by the idea that the government required industry to provide basic amenities like electricity and phone service to ALL Americans, not just the ones who live in cities.

Note, by the way, that the REA hasn't actually provided those services to ALL Americans, though it pretty much covered the parts of the country that were part of the country when the Act was passed. Alaska is still a place where electricity and phone service can be problematic outside the cities. And given that Alaska has the fewest people of any State, and the largest land area of any State, it's likely to stay that way for a long time to come.

Re:Legislation is not free

[CrimsonAvenger]

Yes, the racists were Democrats. They left en masse for the Republican party leading to its current make up of the bottom of the barrel of our society. Welfare leeches

Read more history. The racists stayed with the Democratic Party for several decades, until they just couldn't stomach some of the things the left was doing. Then they left, reluctantly.

Also, note that, traditionally, the "welfare leeches" were, and are, staunch Democrats to this day. Remember, Welfare was also an invention of the Democrats.

You're a typical loony lefty

Wow, that's the first time I've ever been called a lefty! I'm not sure whether to applaud you, or suggest that you're not bright enough to pour sand from a boot with instructions printed on the heel, since I've been posting here for years and years, mostly to the right.

Though perhaps, if you're as far right as you sound like (just a tad right of David Duke), I look like the left from there.

Oh, you should also read enough history to know what you're talking about when you discuss religion in this country. From your rant above, you haven't a clue in the world about the subject.

Even if it was symmetrical, it simply isn't true. I'm not asking them for shit except to stay the fuck out of other people's business.

Oh, nonsense! You use those neat, government supplied roads. And those neat, government supplied raillines (yes, I know the government didn't build them, they just gave away enormous tracts of land to the railroads to get the railroad companies to build them). And that neat, government supplied electricity in your house (don't know where you live, of course, but there's not anywhere in the country that electricity isn't regulated by the government). And that neat, government supplied sewage and water and waste pickup thing (again, don't know where you live, but unless it's way out in the country, you use government supplied services for all that). And that neat, government supplied police/fire protection.

I could go on for a long time about how dependent you are on the government. But I don't feel like wasting any more of my lifespan on the subject. Suffice it to say that most everyone (you included) considers the government services you use to be just part of the background of life. The government services you don't use are for the "leeches". So kindly take your brain out of "park", and look at the real world, not your delusions about it.

Broadband improvement?

[Chas]

Didn't we ALREADY give the telecom industry a whole assload of cash to improve broadband in this country?

And exactly WHERE did that money go?

What?

What?

I can't hear you over that gi-normous flushing sound!

Re:Broadband improvement?

[iminplaya]

Reminds me of a funny interview I heard with Ringo Starr a long time ago:

"What did you do with the money?"
"What money?"
"The money your mother gave you for singing lessons."

Gotta be against at least one

[jmorris42]

Go look at the CBO estimated cost of the broadband bill. $40M in federal grants per year just to get better data? I don't care to read through the text to find where that much money is actually going because I don't care. Listen up maggots, we have a huge deficit. Killing special interest pork like this is the only way we can hope to balance the budget.

Just look at the list of co-sponsors. A rogue's gallery of porkers.

Re:Gotta be against at least one

[postbigbang]

It's more onerous than that. The NTIA, which has been hobbled by the Bush administration, actually is the Commerce Dept wing that's supposed to be doing something, not the FCC.

The NTIA has had more Under Secretaries than (insert bad metaphor here), all of whom have paid lip service while the telcos bring out useless new wireless 'broadband' schemes while converting the US slowly to DSL in the face of cable data competition.

While keeping track of broadband penetration and use might be nice, it's in the wrong department and not charged with doing much with the data. Instead, we can get reports that will motivate Congress to take more telecom lobbying money so that they can continue to make the same decisions that got us to third-world-country status in terms of broadband.

Vote in November.

A nice change

[Lord Byron II]

In contrast to the many "doom and gloom" postings about the US government's actions, it's nice to see a story where they are doing something "right" for a change.

Please RTFA and contract your repesentative!

[GlobalColding]

Because after RTFAing I dont feel like I am getting my moneys worth at best, and feel more like I am getting more cataloged and invaded by FCC... For the $202 MILLION dollars they blow between 2008 and 2012 they will institute more bureacracy with zero oversigt and no concrete goals. Providers will have to submit higher detail reports on broadband use (9 digit zips vs 5 digit zips), so that means their overhead will go ip as well, great since we know who will pay for that as well. Bah, time to email Feinstein again and get another spiffin canned "Yeah I hear you loud and clear, but we know whats best for you" emails reply. Anyone else tired of hemmoraging money to the goverment to help them employ more bureaucrats?

Re:Please RTFA and contract your repesentative!

[zappepcs]

I'm tired of sending money out in the form of taxes and seeing shit in return for it. Yes, I know I get stuff, but there is so much that doesn't make sense that it seems a waste.

As far as zip codes go, clue: they mail you a bill with that 9 digit zip code on the address. There should be NO overhead incurred in using it for reporting. Reporting with a finer grained filter on who has broadband where will help regulators adjust how licenses are granted or retained. The complaint is that ISPs report they have X percent of users with "broadband" coverage, which is a failed description at this point. In truth, the license says they have to have y% of users in a given geographic area covered with "broadband" to keep the license. So the metro areas are covered... anyone out of town is fucked. When they find it financially acceptable, whole neighborhoods can be ignored and they still meet their requirements for licensing.

The current definition of broadband was created when DSL was bleeding edge. It needs redefined in order to force acceptable pricing models in the marketplace.

The idea is to close the loophole that ISPs and telecom operators have used for decades to keep their licenses while not having to serve those areas that are financially unrewarding to serve with the same service.

In all honesty, knowing something about the business, this is stuff that they SHOULD have been doing all along, even if they reduced the granularity afterwards for reports sent to the FCC.

Businesses in the USA are broken with regard to how they handle data. I don't see the EU doing much better as a whole, but this is about the US. Data breaches, security issues, lack of reporting/archiving etc. Over the last 5-7 years, CIOs have gained more power in general, but they still do NOT have control of their data. This is one thing that excites me about Google... DATA is their entire business.... well, more or less. They are branching out, but they still seem quite focused on the data. Handling data is not easy, or cheap, and businesses try to use both of those routes when handling data: easy and cheap. I hope that this will cause them to be a bit more cogent with their data and what they can do with it.

$202 Million kickback to a 700000+ member union?!

[GlobalColding]

Hey I love giving out money as much as the next guy but isnt this just a little blatant? Why are we kicking down this $202 million dollar gift to the biggest communications and media labor union in the USA?! Seriously, RTFA and you will see this thing is of no real substance just another payola to whoever got these parasites elected.

Thank the Editor

[pgn674]

When I wrote this up, I somehow thought that the House, the Senate, and the President were the three branches of the US government, instead of Judicial, Legislative, and Executive. I'd written saying that the House and Senate were branches, when they're both part of the Legislative branch. I thank the editor for catching that and modifying my submission a bit to fix it, thus saving my face :)

Re:Thank the Editor

[n dot l]

Editors...editing? On Slashdot?! You tell such sweet lies...

Wow, back to square one, or worse.

[DontLickJesus]

While am very much delighted with the fact that Congress has loosened the reigns a little, the Webcaster Settlement Act of 2008 (WSA) does not seem to go the direction I expected.

For those who didn't RTFA regarding WSA or just don't understand, it, the important part is this:

"This subparagraph shall not apply to the extent that the receiving agent and a webcaster that is party to an agreement entered into pursuant to subparagraph (A) expressly authorize the submission of the agreement in a proceeding under this subsection"

In short: Webcasters may now attempt to negotiate pricing with the "recieving agent" (ie SoundExchange aka RIAA), but leaves Webcasters in the same boat if an agreement isn't reached. Companies will usually go for some money instead of none, but the RIAA plays by different rules. All this legislation will do is give the RIAA the ability to pick and choose which small webcasters get to survive.

Slashdot, we just don't talk like we used to.

[arrenlex]

We didn't have any stories on the bank collapses, we didn't have any stories on the bill itself, we didn't have any stories on Canada preparing for election... why isn't the politics section used for politics anymore? It seems we only have stories directly relating to tech these days, which is a shame as there are other categories on Slashdot and people have lots of insight about them and would like to discuss them.

Can we stop trying to artificially narrow Slashdot's audience and actually discuss things of more general interest than new developments in number crunching?

Re:Don't you people ever learn?

[GodKingAmit]

Yes, by allowing the evil government to intervene we will have the same piss-poor broadband that the citizens of Japan and Finland have.

Plus the idea that the government would allow any non-trivial network operate without oversight and regulation is rather hilarious.

Why is this a legal matter?

[Reivec]

Can someone explain to me why being able to negotiate royalty rates is even a matter of legislation? Why wouldn't this just be agreed upon in contract with the parties involved? Bit confused here.

Here is a financial proposal

[LetterRip]

My understanding is that the readjustment in the MBS (Mortgage backed securities) ratings resulted in a reduced bank holding valuation. Also Money Market Accounts (MMAs) whose value is based on that valuation experienced for the first time in their history a decrease in valuation. Owners of MMAs seeing this decrease, pulled their money out of their MMAs.

Unfortunately almost all 'short term paper' loans are backed by MMA deposits.

Given the deposit ratio requirements, banks suddenly had far more loans out than deposits to cover them.

They were required to borrow money to have the correct deposit ratios, however, since everyone was hit at the same time, there was no one to borrow from.

My proposal, allows banks to make 'short term paper' loans based on their regular deposits (FDIC insured) and allow a temporary increase in leverage ratios for their loans. (Say 20:1, the exact ratio should probably be picked based on total short term paper that was available prior to the MMA withdrawals plus some margin for increased liquidity needs) the ratio would be ratcheted down at say 1/4 pt per month till previous ratios are returned to.

Also greater ratios for MMAs would be allowed, the more MMA deposits acquired perhaps the faster the regular deposit ratios would ratchet down.

Part two - valuation of MBSes.

MBSes are currently valued as nearly worthless in the market, thus no one is willing to sell them since the are clearly worth more than the market is willing to pay, and no one is really willing to buy them at a 'reasonable' price, because there is no clear idea of what a 'reasonable price' is. There is however, an alternative to 'valuing to market' which can be used when the prices the market is giving for something 'doesn't make sense'.

This methodology, known as 'net present value' or 'discounted net present value', evaluates an asset based on its 'stream of future income'. Essentially it gives the discounted value (a discounted value is the value of getting something right now versus getting it at a future date) of that stream of future income.

This would be done for current MBSes, and because they were reasonably valuated would no longer be toxic and untradable.

It would be best to only evaluate a percentage of the MBSes and use statistics to project the value of the remainder of MBSes so that they do not all need to be individually valuated (obviously this would increase the risk premium to buy them.)

For the future I would require a random sample of all assets/securities, etc. to be valued by the NPV method. If there is a significant difference between the two (say 5-10%) then the entity selling the security would need to publish the NPV as well as the market value. This would signal investors that something is amiss with the valuation given by the market, and would likely help to prevent bubbles.

It would probably be necessary for these valuations to be done by an outside auditor or government agency that would do the NPV evaluation to prevent a conflict of interest.

Tom Musgrove
LetterRip

Please forward this idea to your local congressman, senator, newspaper, if you think it worthwhile

other bills of interest

[rubah]

Figure someone needs to make a fuss on here about it;
http://wizards-keep.blogspot.com/2008/09/orphan-works-bill_30.html

people desperately wanting this orphan works bill to go down way differently than it seems to be headed atm.

It's like Mutually Assured Destruction.

[hey!]

There's been a lot of exaggeration and misdirection on both sides of this. Credit has not completely dried up ... yet. However it is heading that way and the closer it gets the less root causes matter. You don't tell a lung cancer patient that he ought to have stopped smoking years ago. But you don't invite him to light up in his oxygen tent either.

The problem with the bailout bill is not the sheer dollar figure; the $700 billion, after all, doesn't have to be spent. The fund might accomplish what needs to by spending, say, $100 billion. The difference between what needs to be spent and what could be spent is the double edged sword of this proposal. The existence of a huge reserve creates confidence in the stabilization of credit -- very important.

This is how the Fed control the money supply: through manipulating expectations. People don't think the Fed is going to lower interest rates much, so the power of that lever on the economy is lessened. One of the bailout bill's provisions is to lower the floor on what the Fed can set the reserve rate (the cash on hand banks need to keep to cover possible withdrawals) to zero. Actually doing so would be, of course insane.

The Fed has models which say where the point of insanity comes; let's say that is 2%, and we're at 2.2%. If you know the floor is really 2%, then you know that the Fed can't lower the rate below 2%, then lowering the rate from 2.2% to 2.1% isn't going to change your behavior. If you don't know how low the Fed can go, then old Ben can simply be seen thoughtfully caressing the reserve rate lever. He doesn't actually have to push it to 2.1%, if you think he might, and go even lower, you are going to get your dollars into loans fast. If you don't their value could be seriously deflated sitting on your balance sheet.

The $700 billion figure is kind of like that. You'd be mad to set out to spend that kind of money on distressed investments. But the fact that you could is important. Suppose you really need $100 billion, and that's what you have available. You've spent $90 billion, and people are thinking "that about wraps it up for the fund." When you throw out the next five billion, people aren't even paying attention. It does very little to increase confidence in making a loan to some other institution, so you might as well not spend it at all. If you have $610 billion left, the impact of that five billion you're thinking about using is greater, even before you actually spend it, than the impact of spending five billion when it's half of what you've got left.

Unfortunately, that brings us to the other edge of the sword. Suppose we really only need to spend $100 billion, and the remaining $600 billion is there for psychology. Well, you've just created the biggest slush fund in history and handed it to an administration that is not renowned for its prudence, whatever else you may say about it. You could do a lot of favors with $600 billion.

The problem is Constitutional. The Executive isn't supposed to have a lot of leeway in how it spends money, but the size of that pot of money could buy a lot of indirect leeway.

Personally, I think the answer is to stage the funds. Wall Street does this all the time. When you buy a company, sometimes you snap it up, but frequently you stage the investment in order to make the company jump through a series of hoops.

So, let's say we created a $150 billion fund, and replenished it quarterly in each of the following quarters. If the $150 simply disappeared without a trace, then we could stop the infusion. This reduces the incentive for firms to make abusive claims because they might need the fund to be there next quarter. We can dream up new encumbrances on the funds every quarter as specific abuses arise. If in some quarter we only spent $10 billion in some quarter, we'd only put that much in, but if we spent $100 billion, there would be no questio