Brad DeLong is one of the few liberal(ish) economists willing to stick his neck out and spend his personal credibility as a blogger and academic economist on the bailout plan. For him, apparently, there are only two options: paying off the bankers works, and we are able to dig ourselves out of a Depression, or the Depression falls into apocalypse. However, apparently he's willing to stake his reputation on the former hypothesis:

The fact that the Geithner Plan is likely to be profitable for the US government is, however, a sideshow. The aim is to reduce unemployment. The appearance of an extra $500 billion in demand for risky assets will reduce the quantity of risky assets that other private investors will have to hold. And the sudden appearance of between five and ten different government-sponsored funds that make public bids for assets will convey information to the markets about what models other people are using to try to value assets in this environment.

This sharing of information will reduce risk – somewhat. When assets are seen as less risky, their prices rise. And when there are fewer assets to be held, their prices rise, too. With higher financial asset prices, those firms that ought to be expanding and hiring will be able to get money on more attractive terms.

The problem is that the Geithner Plan appears to me to be too small – between one-eight and one-half of what it needs to be. Even though the US government is doing other things as well –fiscal stimulus, quantitative easing, and other uses of bailout funds – it is not doing everything it should.

My guess is that the reason that the US government is not doing all it should can be stated in three words: Senator George Voinovich, who is the 60th vote in the Senate – the vote needed to close off debate and enact a bill. To do anything that requires legislative action, the Obama administration needs Voinovich and the 59 other senators who are more inclined to support it. The administration’s tacticians appear to think that they are not on board – especially after the recent AIG bonus scandal – whereas the Geithner Plan relies on authority that the administration already has. Doing more would require a legislative coalition that is not there yet.

Do note the reference to the AIG bonus scandal not as a problem for bailouts as such, but as something to which Congress has overreacted and is thus clouding its ability to make sound policy choices.