Who wins, who loses under the proposed bailout plan

WASHINGTON -- The proposal to bail out U.S. financial markets to the tune of up to $700 billion creates a lot of potential short-term winners, as well as some losers.

Wall Street and the banking industry are perhaps the biggest winners. Scores of banks and other financial institutions faced with ruin stand to gain a lifeline that should allow them to start making loans again.

Under the plan, the Treasury Department can start buying up troubled mortgage-related securities held by these institutions.

These securities clog balance sheets, leaving banks without the required capital to make new loans and putting the banks dangerously close to insolvency.

There are other winners, too, if the bailout works as intended: anyone soon trying to borrow money.

Top executives at troubled financial institutions, on the other hand, are in the losing column because the proposal would limit their compensation and rules out "golden parachutes."

Of course, these executives may take solace in knowing their jobs still exist.

Investors, including the millions of people who hold stock in their 401(k) and pension plans, should benefit. Failure to reach a deal over the weekend could have sent stock markets around the world tumbling today.

Little help for homeowners

Homeowners faced with foreclosure or those who have lost their homes get little help from the agreement. Nor will it help people whose houses are worth less than what they owe get refinancing or take out equity loans.

It would do little to halt the slide in home values that are one of the root causes of the current economic slowdown.

"It doesn't deal with the fundamental problems that gave rise to the problem -- or alleviate the credit crisis," said Peter Morici, an economist and business professor at the University of Maryland

Treasury Secretary Henry Paulson and Fed chairman Ben Bernanke are potential winners. In just a few months, they have remade Wall Street. If the plan helps to get the economy moving again, they may be remembered for having kept the financial crisis from spreading throughout the economy.

"When I see Hank Paulson and Ben Bernanke on TV, I see fear in their eyes. Like on a battlefield when people are shooting at you. I think they are afraid to say how serious the problem is for fear of making it worse," said Bruce Bartlett, an economist who was a Treasury official under the first President Bush.

President and candidates

If the plan stays together, Congress may be seen as having acted decisively at a time of national emergency.

The president, on the other hand, probably would get little credit for the deal. He allowed Paulson and Bernanke to do the heavy lifting.

It's hard to tell which presidential candidate benefits the most from an agreement they tentatively endorsed Sunday.

Hard economic times traditionally work against the party that holds the White House, and in recent polls Obama has inched ahead of McCain. Furthermore, there is widespread consumer resentment over being asked to bail out Wall Street and lawmakers have learned the proposal has not been popular with their constituents.

And ordinary taxpayers?

Nothing that potentially adds $700 billion to the national debt -- already surging toward the $10 trillion mark -- can be considered a winner for those who foot the bills.

But lawmakers did put in taxpayer protections, including one to require that taxpayers be repaid in full for loans that go bad.

The package could even end up making money for taxpayers, supporters claimed -- but only if the loans and interest on them are repaid in full. Few expect that provision to be a winning proposition, however.