The Paulson Plan - a brave new world

So the final draft of the Paulson Plan is out. I find my copy at the New York Times (PDF).

It's obviously quite a lengthy document so I'll refrain from too much analysis until I've had chance to read it and catch up on some of the press response. My initial impression is that it has absorbed a lot of the different ideas that were milling around Congress, provided authority to the Treasury Secretary to implement all of them, but left it to his discretion on which of them actually do get implemented and how, along with a set of stated aims for the intervention and a substantial framework for oversight.

In other words, we need to wait and see how it is implemented. This is simply the legislative groundwork for the Paulson plan. We don't actually know what his plan is yet.

To shift focus from the economics of the package, the equity warrants are the most significant aspect. They are non-voting but this is still, in a sense, a mandate to nationalise the finance sector. Given the USA's ideological commitment to a free market capitalism where the Government watches from the wings, this is a substantial coup. A philosophical Rubicon has been crossed here.

This is a test too, not for free market capitalism which has already flunked, but for the sort of partnership of State and commerce that predominates in most of the rest of the world. The provisions against excessive executive compensation and the requirements to use the rights over the mortgages to effect a kind of Jubilee on foreclosure could be (maybe) the seeds of an ideology where the public sector acts as the political conscience of industry. We should welcome this warily.