Perhaps this plan will make Art a little happier … but I’d like to read the actual text of the bill before I make any judgments.

Democrats offer alternative ‘no bailouts act’ – CNN.com

WASHINGTON (CNN) — A small group of Democratic House members put together an alternative to the $700 billion financial bailout measure that was defeated in the House on Monday.

Rep. Peter DeFazio, D-Oregon, said they tentatively are calling their options the “no bailouts act,” which would eliminate or reduce the risks to taxpayers in bailing out financial institutions holding bad mortgage assets.

The group introduced its bill after the House on Monday rejected a $700 billion bill that would have authorized Treasury Secretary Henry Paulson to buy bad mortgage-related securities and other assets that have been clogging credit markets worldwide.

DeFazio said he voted against Monday’s bill because taxpayer protection measures were “nonexistent.”

“I have very little confidence in Mr. Paulson,” DeFazio said at a news conference with several other House members, who want Wall Street, not taxpayers, to bear the burden of the bailout.

DeFazio said the crisis can be resolved with market discipline and regulatory functions, which would open up lending opportunities for banks and other institutions.

I did find this story on NPR’s “Marketplace” to be quite interesting as well:

John Dimsdale:The Federal Reserve, Treasury and the FDIC have broad powers to lend money, insure assets and inject cash into the banking system as they’ve already done for the likes of Bear Stearns, AIG and Wachovia … still, in theory, the Fed even has authority to do just what the congressional bailout authorizes — take bad debts off the hands of struggling banks.

  • Nigel Gault: I think there is a limit to which the Fed can do that because you’re almost trying through the back door what Congress just said yesterday the government can’t do.

Global Insight economist Nigel Gault.

  • Gault: The Fed could offer loans against riskier collateral, of course that is bigger and bigger risks for the taxpayer, because ultimately if the Fed makes losses, then the taxpayer would be liable.

The Fed’s other tool is to cut short-term interest rates. But they’re already so low, there’s not much power left in that tool. And using it creates a risk of inflation, says former Treasury economist Bruce Bartlett.

  • Bruce Bartlett: The taxpayer is going to have to pay one way or the other, and voting down this legislation didn’t do anything to protect the taxpayer. It just means he’s going to have to pay in some other way that may be more costly than the $700 billion.

As of the middle of last week, the Fed had issued emergency loans to investment banks and insurance companies worth more than $400 billion.