If the Bailout Doesn't Pass . . .

$700 Billion Is Nothing Compared With the Cost of Inaction

What if, after the House vote today, Americans learn that 3,000 banks will fail? That's what happened during the last U.S. financial crisis -- and today's credit crisis is much greater than the thrift and banking debacle of the late 1980s and early '90s. Inaction has already caused enormous damage to our economy. If the House fails to act, the costs will make $700 billion pale in comparison.

The Treasury's proposed Troubled Assets Relief Program (TARP) has been mischaracterized as "overreaching socialism," a "bailout of Wall Street fat cats" and "penalizing all taxpayers for the actions of a few." Such descriptions serve only the narrow interests of the politicians and pundits who use them.

The Senate passed a larded version of TARP that includes necessary measures to purge "toxic" assets from the banking system and restore financial liquidity. Today the House must do its part. Our country's economic livelihood is in greater danger than many people realize. Consider the effects on:

· Working families. Lack of financing has already hurt existing-home sales, which are down 10 percent from a year earlier, and auto sales, which fell 30 percent last month. Manufacturing output is at its lowest level in seven years. New unemployment claims rose to nearly 500,000 last week -- the highest since the aftermath of Sept. 11, 2001.

· Those nearing retirement. Monday's 777-point drop in the Dow -- caused directly by the House's rejection of an earlier version of TARP -- wiped out a trillion dollars' worth of market value, affecting pension funds, 401(k) plans and IRAs.

· American businesses. It's not just failing businesses but also healthy businesses that can't access capital. Manufacturers, farmers and small-business owners who rely on short-term financing to move inventories, invest in new equipment or meet payrolls cannot get loans. The problem will come to a head as businesses try to roll over hundreds of billions of dollars in loans later this year. Layoffs and bankruptcies will follow -- driving down tax receipts and adding to a mushrooming deficit.

The problem doesn't stop here. In today's global financial system, capital can cross borders in seconds looking for a safe haven. Financing capital is disappearing from businesses and banks in Europe and emerging markets.

· Investors. The deepening crisis is breeding fear and mistrust. Some established counterparties no longer deal with each other. There is a flight to safety, pricing Treasury securities so high that they offer no real return. These trends will get worse.