For the 200 US economists who wrote to Congress opposing the plan and the majority of House members, rejection, if seemingly unconstructive, is the far more conscientious choice, because the alternative (acceptance of the plan) would not have been the right cure for the nation’s financial ills, not to mention that the plan would be the most unjust solution as it is designed to save Wall Street but not the economy.

As Nobel laureate economist Joseph Stiglitz points out in a Guardian article, the basic approach of Paulson’s bailout plan is seriously flawed in that it relies on ‘trickle-down’ economics – that if enough money is thrown at Wall Street, it somehow will trickle down to Main Street. But trickle-down economics almost never works and no more likely will it work this time, argues Stiglitz.

He further explains what the underlying problems of the financial debacle are and how the bailout plan misses the mark:-

“Moreover, the plan assumed that the fundamental problem was one of confidence. That is no doubt part of the problem; but the underlying problem is that financial markets made some very bad loans. There was a housing bubble, and loans were made on the basis of inflated prices.”

"That bubble has burst. House prices probably will fall further, so there will be more foreclosures, and no amount of talking up the market is going to change that. The bad loans, in turn, have created massive holes in banks' balance sheets, which have to be repaired. Any government bail-out that pays fair value for these assets will do nothing to repair that hole. On the contrary, it would be like providing massive blood transfusions to a patient suffering from vast internal hemorrhaging.”

“The US economy has been sustained by a consumption boom fueled by excessive borrowing, and that will be curtailed. States and localities are cutting back expenditures. Household balance sheets are weaker. An economic slowdown will exacerbate all our financial problems.”

Why is Paulson’s plan, or any nuanced version of it likely to be presented shortly, unjust? Because it is highly likely that American taxpayers will be left on the hook if such bailout plan is ultimately adopted, and this is against the “polluter pays” principle – Wall Street has polluted the economy with toxic mortgages, so it follows that it, rather than taxpayers, should be the party to pay for the cleanup.

Dave Lindorff at Counterpunch sees another grave problem with the plan, which has to do with the US dollar slide. But it would be fair to say that the plan would be one aggravating factor rather than a fundamental cause for the decline of the US dollar, which has been suffering due to the twin (budget and trade) deficits any way.

“Stiglitz doesn't even address a fifth problem which is that this trillion-plus-dollar boondoggle (and when you add in the bailouts of Fannie Mae, Freddie Mac, AIG, Bear Stearns, the multiple mega-bank failures and the pending auto-industry bailout, you're already talking $1.5 trillion and counting), all of it with borrowed money, the stage is being set for a collapse in the US dollar, with consequences that will reverberate through the economy. Consider: if the dollar collapses, as many experts say is almost inevitable with this kind of huge addition to the national debt, oil prices (which are set in dollars) will soar to compensate, the price of all the other goods that Americans import--more than half of everything we use in daily life thanks to the decimation of American manufacturing--will rise dramatically, and ultimately, in an effort to stem the bleeding, interest rates will have to be raised, thus bringing what's left of the economy to a grinding halt.”

The question is: will the US lawmakers be able to use their best judgment and take heed of sensible advice, which in Stiglitz’s view means that the preferred option lies in providing much needed capital or equity directly to the distressed institutions in a transparent way, and allowing taxpayers a share of ownership in return, thus eliminating the horrendous task of pricing the toxic papers owned by the institutions.

Even if the plan that is ultimately passed by Congress is along the lines of Stiglitz’s proposal, it is inevitable that taxpayers will be taking on some financial risk. However, assuming that the plan eventually works out in stabilizing the financial system, there is still no dodging the prospect that things will get worse before they can get any better for many Americans as the economy starts to work off past bloated excesses, both in the housing market and the financial markets.

As far as Asia is concerned, provided that the present credit crunch is successfully contained, then what should be keeping Asian countries’ financial chiefs on their toes is probably the US dollar-plunge scenario, given their massive US-dollar reserves and US dollar-denominated asset holdings. Other possible fallouts that they should be vigilant about include oil-induced inflation and a fast deteriorating export trade environment.

The more imminent “IF”, though, is that the US Congress somehow manages to thrash out an agreement which is effective in de-freezing the credit markets and stabilizing the global financial system and which at the same time is not considered repulsive by Main Street America.