If the Bailout Doesn't Pass . . .

A scene from the floor of the New York Stock Exchange yesterday. (By Richard Drew -- Associated Press)

If nothing else, surely we all can agree that TARP isn't perfect. It may not even be enough. But passing it now will help us do three vital things to revive our economy.

First, restore liquidity. The FDIC will raise deposit insurance limits from $100,000 to $250,000. This defensive move may give banks protection from cash withdrawals by fearful depositors. Wisely, the Federal Reserve has already increased liquidity through expanded credit facilities for financial institutions.

Second, suspend fair-value accounting, or mark-to-market requirements for long-term securities, which artificially lowers the amount of capital that banks have to lend. During market extremes, fair-value accounting -- instituted after the S&L crisis -- actually exacerbates problems it was intended to correct. Something is terribly wrong when more than 99 percent of commercial property loans are in good standing yet almost no bank is willing or able to refinance them. The values of those loans, if they are sold in today's market, would be but a fraction of their face values.

Third, recapitalize the banking system. This must occur before banks begin to lend again. Banks need help removing troubled assets from their balance sheets before they launch an ill-fated distress sale to clean up their books. The private sector will have to participate in restoring these assets to health. The securities in question are far more numerous, complex and harder to price than the packaged mortgages that the Resolution Trust Corp. helped failing S&Ls deal with.

Our nation has effectively suffered a fiscal heart attack. As with any patient, emergency technicians must restart the heart quickly before vital organs are irreversibly damaged. If enough time passes, it won't matter what measures are taken -- and our leaders have already waited too long. Everyone involved in this crisis -- financial executives, lobbyists, legislators, regulators and irresponsible borrowers -- bears some blame. But it is citizens who will suffer the effects of inaction.

Legislators should weigh the $700 billion initial outlay against the far greater cost of doing nothing. If handled well, TARP should recover every penny. The House should seize its opportunity to defend America's threatened financial system. Approve this proposal, even though some constituents do not grasp the implications of inaction. The consequences of failure are too chilling to contemplate.

The writer founded J.E. Robert Cos., a global private equity real estate investment company. During the savings-and-loan crisis, the firm was the largest independent contractor acquiring, managing and selling assets held by the Resolution Trust Corp.