Sec 8. Minimization of Long-Term Costs and Maximization of Benefits for Taxpayers.

(a) Long-Term Costs and Benefits.–The Secretary shall use the authority under this Act in a manner that will minimize any potential long-term negative impact on the taxpayer, taking into account the direct outlays, potential long-term returns on assets purchased, and the overall economic benefits of the program, including through improving the economic activity and the availability of credit, limiting losses to the savings and pensions of individuals, and reducing losses to the Government.

(b) Use of Market Mechanisms.–In making purchases under this Act, the Secretary shall maximize the efficiency of its use of taxpayer resources in making purchases by using market mechanisms, including auctions or reverse auctions, where appropriate.

(c) Direct Purchases.–Where the Secretary determines that the purposes of the Act are best met through direct purchases from an individual Financial Institution where no bidding process or market prices are available, the Secretary shall pursue additional measures to (a) ensure that prices paid for assets are reasonable; and (b) share potential benefits or losses of the purchase to the Financial Institution, including, but not limited to, warrants, loss participations, or other similar mechanisms. In determining whether to engage in a direct purchase from an individual Financial Institution, the Secretary shall consider the strength of the Financial Institution in determining whether the purchase represents the most efficient use of funds under this Act.

This should ease some people’s concerns about Paulson making decisions without any review.

Update 09/24/2008: The former Section 8 is now Section 12, and has been expanded to 39 words. There is no way I’m going to support the Paulson Plan unless there is some sort of review and oversight process.

One thing I’ve learned from working for years in investment services …

From Investopedia:

Risk-Return Tradeoff

The principle that potential return rises with an increase in risk. Low levels of uncertainty (low risk) are associated with low potential returns, whereas high levels of uncertainty (high risk) are associated with high potential returns. In other words, the risk-return tradeoff says that invested money can render higher profits only if it is subject to the possibility of being lost.

Because of the risk-return tradeoff, you must be aware of your personal risk tolerance when choosing investments for your portfolio. Taking on some risk is the price of achieving returns; therefore, if you want to make money, you can’t cut out all risk. The goal instead is to find an appropriate balance — one that generates some profit, but still allows you to sleep at night.

It’s all about risk/reward; sometimes you have to lose a little to gain a lot … but somewhere along the line you have to decide when it’s time to cut your losses and recoup.

And this concept holds true in so many aspects of life.