Can Main Street Trust Wall Street?

Kenneth Lewis's editorial in the WSJ today (link) starts with the bold claim that the dispute over Henry Paulson's 700 billion dollar rescue plan shouldn't be about whether we are "bailing out" Wall Street.

The CEO of Bank of America (one of the dwindling number of titans who hasn't declared bankruptcy or been sold) says that buying up the assets (some call these 'bad debt') of the institutions currently holding them would be good for Main Street.

Here's a couple of paragraphs:

"The most critical point for the public to understand is that the money being proposed -- $700 billion -- is not going away. It will be used by the government to purchase assets at a negotiated price -- presumably a price based on the fundamental value of the underlying collateral (taking into account the underlying risks). When the markets recover, the government will then resell these assets -- perhaps at a loss, but not necessarily. The American taxpayer could break even on this transaction, or even post a financial gain.

In the meantime, consumers will see value as money starts to flow, home prices stabilize, and the economy avoids what could otherwise be a deep -- and preventable -- recession."

Lewis does call for accountability-and he does argue that the plan may benefit his weaker competitors even more than BOA.

And he may be correct.

But the picture is so much more complicated. The stability of major banks is critical to the US markeplace-which makes the games some of them were playing all the more repulsive. But there are many other elements-when employers feel confident enough to hire, where the housing market finds its level, what happens to many of the smaller banks and company that help grease the wheels of capitalism.

Yes, helping out the Dobermans may trickle down to the miniature poodles. But the economy doesn't always work that way. In fact, most of the time it doesn't work that way. That's why we need some help for the guys on Main Street, too. We're going to end up with a plan that doesn't give Wall Street or Main Street everything they want-but hopefully will provide enough of what we need so that we are a few helpful steps away from the cliff.

Bailout or jungle rescue-the right conversation, Mr. Lewis, is about what happens next, not just on Wall Street, but on Main Street.