Are we buying a $700 billion 'maybe'?

By Jim Jubak

What if they gave a $700 billion bailout and nobody came?

It's a real possibility. And it would doom the plan to rescue Wall Street with $700 billion in taxpayer money.

All the hearings and late-night meetings have focused on how to improve the plan proposed by Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke. The modifications being considered would indeed do a better job of protecting taxpayers, ensuring someone was watching while the Treasury forked out the moola and giving taxpayers some stake in the companies they'd be bailing out. (See my column "Let's not rush to blow $700 billion.")

The proposals being discussed now, like the original plan, pretty much assume it'd work for the government to buy the busted assets that now choke the financial markets -- and that all that's left to question are details like how much the government would pay and who would manage the portfolio.

Throwing $700 billion at Wall Street, everyone seems to believe, would restore confidence in the financial markets, repair the balance sheets of U.S. banks and other financial institutions, and get the great national borrowing-and-lending machine back up and running so the economy would start creating jobs again.

But the odds are no better than 50-50 that even an improved plan could accomplish that near-term fix -- to say nothing of reforming the financial markets to avoid a recurrence of this crisis or a similar one. I expect Wall Street to cheer and global stock markets to soar if and when a deal is announced. Stocks could even rally through the end of the year.

It would take three months or so, however, before we knew whether the plan was truly restoring something like business as usual in the financial system. If the plan failed, we could be looking at a resumption of the crisis in January or February.