Today at about 5 p.m., President Bush, presidential candidates John McCain and Barack Obama, and congressional leaders will walk out of the White House and support a modified "Troubled Asset Relief Plan (TARP)," as agreed upon in negotiations with Treasury Secretary Paulson and Fed Chair Bernanke over the past few days.  Congressional leaders hope to pass a bill this weekend.  If they fail to do so, the markets are poised for a big downturn early next week.  If they succeed in passing the bill, the markets will rally and the Treasury Department will start the long process of disposing of these troubled assets at taxpayer expense that could easily exceed $300 b.  I expect the bill to pass this weekend.

Congressionial leaders have imposed many changes on the original 3-page bill submitted by Mr. Paulson, which would give him and future Treasury Secretaries unfettered power over $700 b. to finance the purchase of troubled assets.  Senate Banking Chair Chris Dodd (D-CT) has proposed a 44-page bill, and House Financial Services Chair Barney Frank (D-MA) has proposed a 42-page bill.  They want and will probably get requirements that financial institutions that sell their troubled assets to the Treasury:

1.  limit the salaries and golden parachutes of top officers;

2.  give the taxpayers equity participation or senior debt to offset some of the bailout cost; and,

3.  increase their cooperation in restructuring mortgages to avoid foreclosure.

 Treasury will be required to report to the public and to Congress on a regular basis.

Congress won't get new authority for bankruptcy judges to reduce principal, cut the interest rates, and extend the maturities of home mortgages.

A lot has been said and written about this plan.  I don't worry too much that it might fail, although a lot will depend upon how much the Treasury Secretary pays for these troubled assets and what he sells them for.  I am very concerned about the amount of debt we're taking on to combat the financial crisis -- just over $1 trillion and counting.  That virtually guarantees higher interest rates and higher inflation in the next several years.  It will also put a huge burden on our children.