House Republicans are hoping that some elements of their not-a-bailout-bailout proposal will make it in to the final draft.
Here's a look at what they want to do, and why it probably won't work.
Certainly, the alternative is politically attractive. One side says: You give banks 700 billions and never get it back. The other side says: We collect insurance premiums and we never pay anything.
The government would sell insurance to companies that buy mortgage-backed securities. The companies would pay a premium.
But trying to price insurance products based on the things underlying the mortgages is very complicated - a whole new valuation process would have to be invented.
I'm not an economist, but most folks who are say that the big problem now is that the markets are locked; there's no liquidity. Asking firms to pay the government does not put more money into the economy.
The Paulson plan basically gives these companies some liquidity in exchange for the bad assets. The GOP principles would give money to the government in exchange for insurance. It's easier to borrow money for investment against treasury bonds; who knows how tough it will be to borrow against the new insurance?
Says one economic expert who is privy to the negotiations: "If the government buys mortgage backed securities, it gives more leverage to help them renegotiate. If the banks have all this stuff, then the government is guaranteeing the banks. It's a big moral hazard. We cover the banks on the downside, they get to compete on the upside, and they have no incentive to restructure."
Sources briefed on yesterday's meeting said that Paulson made these points, and that the White House rejected the insurance idea as unworkable.
That's one reason why Democrats got really mad yesterday when Minority Leader John Boehner brought them up.
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