Will the bailout work?

With Congress set to adjourn next week for the election season, time is short to work out the details of the plan and get it passed.

Congressional leaders, including many key Democrats, had already been considering such a rescue plan, and they indicated quick acceptance of the proposals.

On the sidelines, however, there is deep scepticism on both left and right - with conservative Republicans objecting to any more bail-outs, and many Democrats asking why we should help Wall Street rather than the four million people whose homes are being foreclosed, or repocessed.

And the presidential candidates, who are being left on the sidelines in the negotiations, are also reluctant participants in the process.

Both realise that a sizeable bail-out that commits the Federal government to significant new spending will severely limit their plans - either to cut taxes or to introduce a new health care plan - in the year after the election.

One model being talked about is the Reconstruction Finance Corporation introduced in the 1930s during the Depression. But it should be remembered that in 1933, President-elect Franklin Roosevelt refused to agree a bi-partisan deal with President Hoover to stave off the collapse of the entire US banking system, which shut down completely on the eve of his inauguration.

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