Paulson's bailout plan is not the only option
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Paulson's bailout plan is not the only option

Despite approval of Paulson's bailout plan, it's not too late to devise a better approach than the one the Treasury has put on the table. Peter Lee looks at alternative strategies that might prove sharper.

The US government warned that failure to pass the Paulson bailout plan into law would lead to disaster. In the worst-case outcome, that could mean wholesale nationalization of the finance industry. With Frannie and AIG, and a banking system that fails without dramatic Fed intervention, the Bush administration has already made a start. 

IDEOLOGY MUST GIVE way to pragmatism. Around the world, the role of the state in financial and banking markets is set to grow and the private financial services industry will shrink. Let’s just get used to it. The programme of emergency bail-outs and nationalizations will roll on for some time.

There is a basic requirement for money to move from buyers to sellers, employers to employees, savers to borrowers. Where that system is fundamentally threatened, the state must always be ready to step in. In an absolute extreme, when no other credit is deemed trustworthy to lend to, it must not just support but effectively replace the financial system.

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