The bail out bill is a bad one. It's time for Congress to walk away.

Do we really need a bail out deal? Not according to economist James K Galbraith.

President Bush and his Treasury secretary, former Goldman Sachs chief executive Henry Paulson, have warned of imminent economic collapse and another Great Depression if their rescue plan isn't passed immediately.

Is that true?

"It's more hype than real risk," said James K. Galbraith, a University of Texas economist and son of the late economic historian John Kenneth Galbraith. "A nasty recession is possible, but the bailout will not cure that. So it's mainly relevant to the financial industry."

It's sort of a strange crisis. The banks will currently lend to credit card customers and to consumers, but they won't lend to other banks. So Henry Paulson is asking Congress to tax every American over $2,000 just to bail out the wealthiest bankers in the world. But those superwealthy bankers are in trouble because their fellow bankers are either so stupid or are are such disreputable crooks that other bankers don't trust them enough to loan them money.

Henry Paulson presented "the Paulson proposal" to Congress in his own name because Bush is so unpopular that presenting it as the Bush Proposal would be a major strike against it. But Henry Paulson is the ex-Chairman of the last of the five largest financial banks, Goldman Sachs to disappear since this Spring. Paulson is not an economist. He has a Harvard MBA. He's primarily a securities salesman. His job has always been to make deals. Someone else was the analyst who explained the overall system. (I know it's not "either/or", but Paulson is still primarily a deal maker.) Paulson is watching the investment banks which have been his career disappear. Sure he wants them saved. But should the rest of American society have to pay to save them? Those banks haven't added that much value to the American economy. $700 billion dollars? And that's just the down payment?

Buying the bad mortgages from the banks simply does not address the central problem. Millions of families have signed crappy mortgages in order to severely overpay for homes. Now Bush/Paulson demand that the taxpayers buy those crappy mortgages at the inflated prices to keep the banks from having to take the loss that was built into those mortgages when they were issued. Making the taxpayers buy those crappy mortgages does not address the core problem! It just removes those mortgage contracts from the banks that created them and forces taxpayers to buy them. That allows the banks to avoid taking the loss that was built into the overpriced mortgages when the banks first issued them.

The banks do not want to take the loss when home prices drop to realistic levels. That's why the bankers are calling the proposal that Bankruptcy Judges be allowed to rewrite mortgages to realistic interest rates, realistic payments and total values that reflect what the market will pay for the property. This is a power that the judges already have for second homes and yachts, but the banks consider that provision a deal-breaker for any Congressional bail out legislation.

The core economic problem causing the credit crisis and the bank failures is that the housing bubble (created by Alan Greenspan's Federal Reserve) caused massive overpricing in homes and real estate loans. That real estate was financed by loans that banks made to individuals and businesses who were not going to be able to pay them if the housing bubble burst. When Greenspan raised interest rates after Bush was reelected in 2004, he burst the housing bubble he had created by lowering interest rates and encouraging bad loan underwriting before the 2004 Presidential election.

A banker who lends money to someone who can't pay it back deserves to fail. Instead those bankers are being allowed to foreclose on the overpriced property, regain ownership and then resell it. But the bankers can't finance that operation unless the other bankers lend them more money, and the other bankers have decided that they don't trust the ones who want to borrow money enough to lend anything to them. Apparently these bankers have suddenly gotten "banking religion." They won't lend money to other bankers who don't look like they can pay the loans back. If the mortgage bankers had been competent and acted the same way, there would not have been a housing bubble! No housing bubble, no credit crisis. There is the cause of this whole mess.

So now the Bush administration wants to tax all of us to bail out the crooked and stupid bankers because if the government won't kick in the money, the bankers themselves don't trust the other bankers enough to lend them money.

Now we get a tag-team match of Henry Paulson going to Congress to tell them "This is a limited time offer! If you don't buy it NOW I can't guarantee your safety tomorrow!" while George Bush went on TV and told the American public "Get Congress to pass this bill NOW or the disaster cannot be prevented!" That's a tag-team match between a salesman, Paulson, urging everyone " Buy now!" and a habitual liar and fool, Bush, saying "Trust me!"

There is going to be a recession. There already is one, but I suspect that the economic statistics published by the Bush administration have been "adjusted" or "fudged" to look better than they really are. No matter what legislation passes, the Recession is going to be a bad one. But the warnings of an economic meltdown are excessive.

Congress needs to take its time and get the bail out legislation right. Most importantly, the bankers who caused this credit crisis must not be rewarded for their stupidity and greed. Especially they must not be rewarded out of taxpayer funds. Any time a sales person/scammer says "You have to buy this NOW or you will lose it!" the best decision is always to walk away.

If there is a decent deal to be made, the salesman will come back to make a reasonable deal. If there is not a reasonable deal to be made, then walking away is the right solution.