It appears all but certain that by this time next week Congress will have appropriated nearly a trillion dollars so the Treasury can begin purchasing Wall Street's bad debts. Before they hand over a blank check, Democrats on the Hill should insist that major regulatory reforms accompany the bailout. The bailout is necessary -- but so are significant improvements in our regulatory regime to ensure that the conditions and abuses that led to this collapse do not recur.
Democrats like Barney Frank have been pushing for such changes before this crisis, but were told that they were unnecessary and anticompetitive. Now that such criticism has been discredited, Democrats should move forward aggressively this upcoming week to link assistance to Wall Street with tougher oversight over how the financial markets function. They must also ensure that any package includes protections and assistance for homeowners.
Some will argue that there is not time for this. Nonsense. Unless Democrats act now they may not get another chance. Months from now reform might seem less imperative and opposition to it will regroup.
Democrats and Republicans have been arguing about the necessity of regulation over our capital markets since the New Deal. Since Ronald Reagan's Presidency the antiregulators have had the upper hand. This crisis is in part their legacy.
In some countries the government appropriates valuable private property. Under this deal it's the private property owners that get to dump their devalued debt on the public. The least Congress can do is insist that some long term reform accompanies the exchange.