Market relief

Our view: With the government rescue package signed into law, now begins the hard work of repairing the nation's financial system

October 5, 2008

The people Rep. Elijah E. Cummings heard from, and there were many, wanted to know one thing - how would the $700 billion financial rescue plan help them? The neighbor in West Baltimore had a mortgage he no longer could afford. Retirees despaired over their dwindling savings. A businessman was worried he might have to lay off workers. Mr. Cummings sympathized with all of them, but as he reluctantly cast his vote for the government bailout package last week, he knew too many of his constituents would still be left struggling.

The controversial legislation, signed into law by President Bush, gives unprecedented powers to the U.S. treasury secretary to intervene in the troubled financial industry, get credit flowing again and start the sluggish economy churning. How or when the hoped-for benefits will trickle down to Americans ensnared in the subprime mortgage mess - the root of the economic trouble - is anyone's guess. Mr. Cummings, who initially voted against the bill, has 3,000 residents facing foreclosure in his city-suburban district, which translates into $362 million in losses for homeowners, lenders and the city, according to RealtyTrac and the state's housing agency.

But the $700 billion package was never intended to resolve individual problems. It was crafted to avert a greater collective crisis that threatened grave economic consequences here and abroad. And it took another $150 billion in tax relief (and other economic sweeteners with the whiff of pork barrel perks) to get the legislation passed in the Senate and House.

The House vote Friday ended a tumultuous week in which the fate of the bill had been uncertain and a wave of panic hit the markets. A majority of Republicans led a revolt to defeat the Bush administration's measure, only to have the Senate resurrect it, rework it slightly and send it back to the House. Members of Congress return home now to campaign for re-election, where they're certain to hear from voters both upset and relieved.

Relief won't be swift. Treasury Secretary Henry M. Paulson Jr. has an overwhelming job ahead as he organizes the government's purchase of billions of dollars in troubled assets, the central component of the rescue plan. He should buy low, so taxpayers have the best chance of recouping their investment. He also needs to assemble a strong oversight team and lead a forceful restructuring of mortgages to keep more Americans in their homes.

And Congress, when it returns, must begin rebuilding a regulatory system that safeguards the interests of Main Street over the profits of Wall Street.