Essentially, the alternative being drawn up by Messrs. Cantor, Ryan and Hensarling aims to free up private capital to buy distressed securities by pushing through a series of tax and regulatory reforms, and by creating government insurance for mortgage-backed securities that are now burning holes in financial firms' balance sheets. Washington has more experience running guarantee programs, they note, than running a hedge fund (the Paulson plan). Their proposal would avoid committing hundreds of billions of taxpayer dollars to the discretion of the Treasury Department to "save" the financial system. And it doesn't turn the U.S. government into a giant (and conflicted) owner of U.S. financial institutions.
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