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In the fast-moving blur that our financial sector has become,  I vaguely recall the argument that taxpayers (or Asian creditors) could someday turn a profit on the “distressed assets” they’ll be purchasing in a few week;

Still, I’m a bit skeptical. I should note that I haven’t heard this claim in the political posturing that has passed for Congressional debate the last few days. (I wonder how many pols are willing to put their principled free-market stands through the risk of a real-world test. Very few, which is why we’re more likely to end up with a package that includes tax rebates for you and me.) But we may hear it again, so it’s worth dissecting, however briefly. If there is a profit to be made from these assets, why don’t the companies keep them or why doesn’t some enterprising private-sector investor snatch them up?

I’ll be waiting for the answer.

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If something is too big to fail, shouldn’t it be completely part of the government rather than lie in some netherworld between the public and private sectors? That’s the only question worth asking in light of the Fed’s proposed bailout of our two big mortgage giants, Fannie Mae and Freddie Mac.

What also seems odd is the constant reassurance from figures of authority that nothing is really wrong, that Fannie and Freddie don’t really need any money from the Fed. Then why all the fuss and bother?

At some point, someone in power (and their enablers) will have to start reading from a reality-based playbook. How else do you explain the large number of people who believe the country is on the wrong track and the large number of pundits and commentators who insist everything deep down is really OK?

Maybe Phil Gramm was right. Or maybe, just maybe, if you start to think about it, just for a fraction of a second, as crazy as it may sound and despite all of Gramm’s degrees and years in public life, he has no idea what he’s talking about. He just wants questions about the economy to go away.

Now that sounds like a reality-based playbook for a presidential campaign in 2008.

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