If not now, when? If now, why? Or, to quote the wrong holiday, Ma nishta…?

I posted this in comments at Lance’s place, but figure to run it up the flag here as well.

Speaking as one who supported Monday’s bill and generally opposes today’s, here’s the high-level list of reasons:

1. It wasn’t going to authorize the whole $700B, but about$250B, with renewal (or scrapping) to follow. (That Henry Paulson was an idiot in his pitch, and that that pitch has been perpetuated to the detriment of sanity, was documented by Stan Collender.)
2. Even a broken clock is right once or twice a day. Yes, the administration cried “Wolf,” but the tense of your post is incorrect—banks are already not loaning to creditworthy entities.
3. What made it worse is that about two weeks ago, they decided not to loan to each other. Or to do so only at (relatively) ridiculously high rates.
4. Subnote of the above: My HELOC is currently somewhere between 3.75 and 4.75%. Which means that I could borrow $25K or $50K or $100K on it, invest that money at LIBOR, and make a profit. That’s the type of thing I mean when I say the markets are too out of kilter. The market seems to believe that I am a better credit than, say, Citigroup.
5. They may be right.

On the bill itself:

1. Krugman is right. It’s not good—the current “pitch” is economically inaccurate; George W. Bush was more correct than Henry Paulson on what would work—but it was probably the best we were going to get as a bipartisan effort.
2. There were conditions in it that should have ensured, on balance, that the taxpayer ended up with a significant equity participation in the firms that were saved. (Dodd’s addition: 1.25(Y-X) in company stock for every dollar lost between the purchase and the final sale, was inspired.)
3. There were restrictions—not so strong as I’d like, but restrictions at least—on the bailout monies going to the high-level execs who have mismanaged those firms for the past several years.
4. If it’s not a bipartisan effort, then the Republicans are going to hang it on the Democratic Party for the next 34 days, even though their people are the ones who said it was necessary.
5. Given (1) and (4), the alternative when the bill failed was one of two things: (a) take the Brad DeLong approach or (b) introduce a ill that looks like a bill that Democrats would support: fund infrastructure, extend unemployment benefits, put more money in the hands of people who are (to borrow a phrase) “liquidity constrained”—that is, the people who will spend it. It will end up in the same place—on some bank’s balance sheet—and have at least done some good. And then dare Republicans to veto—or run against—the bill. (Fairness note: Domenici’s addition in the Senate fits well in that group.)
6. They didn’t do either of those. They made it a bill that appeals more to the Republican money-base’s interest, and does even less for the credit crisis than the previous one did.
7. I realise the essence of the argument is “Wasting $400B or so of a $700B bill is all right, but wasting $500-550B of an $850B bill isn’t.” But the original bill was, as Krugman noted, marginally acceptable. The current one is well over the margin and into “unfunded giveaways that won’t support the economy or increase the velocity of money.”
8. That last point is essentially the argument of J. C. Bradbury in discussing Kyle Lohse’s new contract: you could have a mediocre deal today, or a better one later. Since it’s only going to get worse over the next few weeks, the chances of getting a better deal by waiting only go up. But apparently Hillary Clinton and Harry Reid decided not to go that way.

Which, I would argue, is a mistake.