Fi-Cri: Washington fiddles, Brussels performs, I opine

LSE’s Willem Buiter today looks at the fi-cri in a comparative way, comparing the financial stabilization effort underway in the US with that in Europe’s Benelux region (Belgium, Netherlands, Luxemburg.) He concludes:

Especially remarkable is the fact that it took much less time and effort to put together the multi-country fiscal rescue effort of the three EU member states than it took to cobble together the son-of-TARP in the US. Incipient federalism triumphs over disfunctional established federalism.

‘TARP’ is the Troubled– or ‘Toxic’?– Assets Relief Program still being negotiated in Washington. Those negotiations are once again today, as last Wednesday, said to be nearing completion.
Paul Krugman is (cautiously) for it, writing:

Not a good plan. But sufficiently not-awful, I think, to be above the line; and hopefully the whole thing can be fixed next year.

Seeking Alpha has some worthwhile comments on the draft legislation here.
For my part, I am very “troubled” about the name of the plan and what it connotes. It is not the “Troubled (or Toxic) Assets” that need “Relief”. It is the economy as a whole and all the hard-working people who participate in it that need relief from the current strangulation of the credit markets and the very real threat of Depression.
What the Toxic Assets themselves need, by contrast, is radical restructuring and re-regulating. I call this my “Three R’s program.”
And what the present holders of the toxic assets need is discipline. Not the alleged “discipline” of the market, either; but the discipline and accountability of a legislated scheme to regulate the financial markets that has been publicly deliberated and adopted, and is well understood and well implemented. Enough with all these wild Ponzi schemes and dodgy financial “instruments” that have proliferated just about incomprehensibly in the barely regulated financial markets of the past nine-ten years.
As for the TARP– the idea of this extremely expensive bailout being discussed in Washington is that it should be extensive enough to protect the whole of the financial from further corrosion of its claimed “value.” No-one is sure if the $700 billion TARP is actually big enough to do this. To my view, the only value of any such bailout plan (if one is indeed needed) is that it should prevent total corrosion/meltdown of the financial system just for long enough to allow the Three Rs program to be carried out on the financial assets that it protects.
What is material wealth for, after all?
If it is good for anything, it should surely be used to allow all of humanity (or, in a more restricted sense, all members of a single national community) to have the basic underpinnings of human flourishing. That, after all, is the way to “buy” a decent sense of security, wellbeing, and hopefulness for all of us.
Meantime, Buiter’s comment about the dysfunctionality (in British English, disfunctionality) of the US political system at this time of crisis is certainly right on the mark.
(Update, 10:55 a.m.: Kudos to Rep Marcy Kaptur (Dem-Ohio) for her proposal for a Wall Street Reckoning project to replace the TARP bail-out proposal. (HT: Juan Cole.) Kaptur calls for a “modernized Glass-Steagall Act” to re-regulate the US banking sector. Glass-Steagall was the landmark 1933 legislation that established the FDIC. It was repealed in the Gramm-Leach-Bliley Act of 1999. Sen. Phil Gramm is a close ally of John McCain’s and has been tipped to become Secretary of the Treasury if McCain wins the election.)