Friday's dramatic 263-171 House vote to pass the "Emergency Economic Stabilization Act of 2008" and President Bush's signature a few hours later raises a question:  Will it work?

I think it will, but a lot depends upon how well Treasury's reverse auctions go over the next year or so, how quickly our housing market revives, and how quickly confidence is restored in our financial institutions.

For those reverse auctions to succeed, Treasury will have to set high enough prices for "troubled assets" so the financial institutions that hold them will be willing to sell them, but not so high that the taxpayers lose money in two or three years when Treasury starts selling those assets.  This won't be an easy task.

For the housing market to revive, banks are going to have to start creating mortgages and investors around the world will have to be willing to buy mortgage backed securities (MBS) again.  Even quite credit worthy homebuyers have not been able to get mortgages recently.

It really wasn't a surprise when Wall Street didn't have a big rally after the Paulson plan passed the House earlier today.  Wall Street had moved on to the next trading opportunity.

In one of the best-ever Washington-related examples of the common Wall Street saying of "Buy on the rumor, sell on the fact," by the time the legislation was passed, traders had pretty much assumed that it would be approved and were focussing on other issues.  Many of the people who had been the bill's most ardent supporters the past two weeks started to talk about what else would be needed, how this bill only dealt with part of the problem, other economic issues. 

Traders had traded early in the day on the possibility that the bill would be adopted.  When the possibility was high earlier in the day, the Dow was up.  Once the possibility was over, that is, when the bill actually was adopted, the Dow moved down and closed lower. 

If it wasnt already, the 159,000 drop in jobs reported this morning should put the Paulson plan over the top in the House of Representatives later today.  This is the apparent direct connection to main street that's been missing so far.  Today's report provides the political cover any Republican or Democrat needs to vote for this bill.

(Question: Does anyone doubt that the vote was intentionally scheduled to occur after the jobs report?)

So what will happen next?

1.  The Paulson plan will not end the economic woes of the past few weeks. Anyone who thinks the situation will immediately turn around when the bill passes is going to be suprised and disappointed.  I suspect that markets have already assumed it will be enacted and have moved on.  Yesteday's 349 point drop in the Dow may have been a case of this version of "buy on the rumor; sell on the fact."

A quick update from my post from earlier this week about the Bush administration's absolutely terrible communications efforts on Paulson-Frank-Dodd: It looks like they finally started to get it.

Bloomberg reported yesterday that the business groups that had been largely silent finally got involved this week.  And the administration finally realized that it getting out in front not only was not helping, but it may have actually be hurting, so it changed tactics and stayed below the radar screen.

Approval ratings for Congress have been falling the past week, presumably because those who were sampled were not happy about the House's failure earlier this week to pass the Paulson-Frank-Dodd plan.

But I thought the majority didn't want the plan.  If that's really the case, shouldn't Congress' approval ratings be rising?

A few minutes ago Federal Deposit Insurance Commission Chair Sheila Bair told reporters that she would request a temporary increase in deposit insurance to $250,000.  A top Senate Republican staffer just confirmed that Treasury will send up legislative language soon.  Earlier today John McCain and Barack Obama endorsed the idea.  In my opinion, this ensures that the House will reconsider and pass H.R.3997, the "Emergency Economic Stabilization Act of 2008," Thursday afternoon with this modification.

Members of Congress who voted against the bill have reacted to yesterday's market downturn with pledges to reconsider their votes.  They will vote for exactly the bill the voted against yesterday with the addition of the deposit insurance amendment.

Market and governmental gyrations such as this are rare in the U.S.  That's what happens when you try to legislate on such important matters too close to an election.

Several of the readers who commented on Andrew's post from yesterday said that the House didn't pass the Paulson-Frank because supporters had failed, miserably, to communicate the need for the plan to those who needed to be convinced.

I'm a managing director at a public relations firm and a former national director of public affairs at one of the largest global PR agencies, so please believe me when I say that it's hard, or actually impossible, to argue with this.

From a communications perspective, this has been done about as wrong as is possible.  There have been no credible spokespeople, the messages about the plan have been wrong or incomplete, the plan's supporters failed to understand the different audiences that had to be reached, and few people validated the claim that the plan was needed.

First, nice work Pete.  CG&G readers haven't seen everything Pete's done this week and weekend to stay up-to-date on what's been happening on Paulson-Frank-Dodd (Or is it Paulson-Dodd-Frank?), but I doubt that many other people outside those in the room knew as much as soon as Pete did.

Now, about the plan...

One of the things I've learned over the years is that, while there's nothing wrong with having an opinion about something, there are times that you have to allow those who know, or should know, more than you to make the decision.  That's what we call leadership.  Even in the blogosphere world of alpha males and females, where everyone purports to be an expert on everything, there are times that you need to let others take the lead.

For me, this is one of those cases.  I am willing to bow to Paulson, Dodd, Frank, and Bernanke, etc. because I am assume they know a great deal more than me on this situation.  It's not weak to admit that; it's called delegation.

The legislative language of the "Emergency Economic Stabilization Act of 2008" was just released.  There were so many hits on the House web site that I can't get it to come up.  Fortunately, C-SPAN posted it here.

In the next few hours, the negotiators on the financial rescue plan will announce an agreement in detail.  Legislative language is being finalized.  It's still not clear how many House Republicans will vote for it, but enough will for the House to pass it tomorrow morning.  There is not enough time for the Senate to take it up before Rosh Hoshanah, which begins tomorrow at sundown, but Senate passage on Wednesday or Thursday is not in doubt.  I expect President Bush to sign it late this week.