Blame Academic Economists for Stalled Bailout

Republican Senator Richard Shelby moments ago on CNN explaining why the tentative deal reached earlier today is bunk:

"If 200 of our economists say the plan is flawed we should listen to them."

What the 200 -- actually 192 -- economists have said:

As economists, we want to express to Congress our great concern for the plan proposed by Treasury Secretary Paulson to deal with the financial crisis. We are well aware of the difficulty of the current financial situation and we agree with the need for bold action to ensure that the financial system continues to function. We see three fatal pitfalls in the currently proposed plan:

1) Its fairness. The plan is a subsidy to investors at taxpayers' expense. Investors who took risks to earn profits must also bear the losses. Not every business failure carries systemic risk. The government can ensure a well-functioning financial industry, able to make new loans to creditworthy borrowers, without bailing out particular investors and institutions whose choices proved unwise.

2) Its ambiguity. Neither the mission of the new agency nor its oversight are clear. If taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must be crystal clear ahead of time and carefully monitored afterwards.

3) Its long-term effects. If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, America's dynamic and innovative private capital markets have brought the nation unparalleled prosperity. Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted.

For these reasons we ask Congress not to rush, to hold appropriate hearings, and to carefully consider the right course of action, and to wisely determine the future of the financial industry and the U.S. economy for years to come.

UPDATE
More from a Shelby press conference:

All I can say is, we had an interesting meeting with the president and the vice president, Senator Obama, Senator McCain, and a lot of the leaders in the Banking Committees of both houses.

I can tell you, I don't believe we have an agreement. I have voiced my concerns all along. I don't know if you have this, but I have a five-page -- five pages of the leading economists in America that wrote to me and the leadership, saying the Paulson plan is a bad plan. It will not solve problems. It will create more problems. We're rushing to judgment, that we do have stress in our financial markets, but this is not the best way. We ought to look at alternatives.
This is not me. This is economists at Harvard, Yale, MIT, University of Chicago, our leading universities, five pages. It ought to tell you something. I brought it up in the hearings.
I'm probably not welcome again, but I will be back.

UPDATE 2

Here is a list of the universities who had at least two economists sign the letter:

School	Signatures
University of Chicago	44
Northwestern	27
University of Pennsylvania	14
Columbia	12
Stanford	9
Berkeley	7
Harvard	6
UCLA	6
University of Minnesota	6
Ohio State University	5
Indiana	5
Johns Hopkins	5
Duke	4
MIT	4
George Mason	3
University of Kansas	3
Nobel Laureates	3
Washington University	2
Vanderbilty	2
University of Wisconsin	2
NYU	2

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