But Will It Work?

By PETER S. GOODMAN
NYT

As the federal government steps to the center of the financial crisis, devising plans to take ownership of hundreds of billions of dollars’ worth of bad mortgages, a pair of simple questions rise to the fore: Will this intervention finally be enough to restore order? And what will this grand rescue cost taxpayers?

The Treasury Department, as overseer of the financial system, has in recent weeks unleashed a vast array of initiatives in a bid to stave off catastrophe. It took over the country’s largest mortgage finance companies and put untold billions of taxpayer dollars on the line to prop up other lenders.

Now, although the details are still being worked out, the government is dispensing with rescuing one company at a time, and instead is taking on a vast pile of bad debt in one gulp.

If it all comes to pass — if Uncle Sam becomes the repository for the radioactive leftovers of bad real estate bets — will the crisis lift? Will the fear that has kept banks clinging to their dollars, starving the economy of capital, give way to free-flowing credit?

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