GOOD POINTS OF THE PROPOSED BAIL OUT

1. It will restore liquidity.

The credit crisis has been a crisis of liquidity. In simple terms, banks have hoarded their cash, and
borrowers from home owners to large businesses have not be able to access money. Any loans they
have got, have been expensive. The deal should help improved liquidity not just in the US, but around
the world, allowing banks to lend to each other, and in turn lend to consumers.

2. It will avert another major bank collapse.

Bear Stearns, Lehman Brothers, Fannie Mae, Freddie Mac, Merrill Lynch, AIG behemoths of financial
world that have either collapsed, been taken over, or effectively nationalised. There are only so many
giants that can fall. The deal should stop any more from toppling, by stripping the "toxic assets" from
their balance sheets. This should save, potentially, tens of thousands of jobs, not just in the US but also
in Europe.

3. It may not end up being as costly as feared

The $700 billion (377 billion) cost sounds enormous, equating to more than $5,000 for every US
taxpayer. But, in theory, the US Treasury could make a profit from the deal if the economy improves,
and the toxic assets end up being worth more than they are now. The last time the US Treasury
attempted a similar bail out of the savings industry in the 1980s it eventually made a profit.

4. It draws a line in the sand

By buying all the "toxic assets" the US Treasury would be cleansing banks' balance sheets, allowing them
to start afresh.

With their current poisoned balance sheets, banks are finding it difficult to borrow and difficult to lend.
Stripped of the problem debts, financial institutions can return to the tried and tested model of only
lending what they have in their kitty a business model that well served British building societies for
most of the last century.

BAD POINTS

1. It is hugely expensive

$700 equates to 5 per cent of the US gross domestic product or more than $5,000 per American
taxpayer. The US taxpayer could be paying for this for generations to come if the Treasury fails to make
any return on these assets. And they will pay for it through higher taxes or higher inflation both of
which are likely to prolong the global consumer downturn.

The US state borrowing is estimated to hit an eye-watering $11.3 trillion.

2. The US could become reliant on China

The Treasury intends to raise this money by issuing Treasury bills Government bonds. There is not a
huge demand for US debt on the international money markets and one of the few parties willing to buy
such a vast amount of Treasury Bills is likely to be the Chinese Government.
The world's largest communist state could become the borrower of last resort for the world's largest
democracy.

3. The deal is nationalisation on a grand scale.

The pioneer of free-market capitalism is, effectively, nationalising vast swathes of US industry. The profit
motive, which has whatever its faults created generations of wealth could be replaced by
Government policy as the main driving factor in the US economy.

Hank Paulson, the US Treasury Secretary, has already been forced to agree that executives in the private
sector will have their pay capped if the deal goes ahead. Will the Government be able to veto these
companies' corporate decisions? It would seem that the pendulum is swinging from "light-touch
regulation" to "full-blown intervention"..

4. It won't work

There is no guarantee that this plan will work. Mr Paulson has yet to reveal the full details of how, and
which toxic debts he intends to buy up.

Nothing on this scale this has been attempted before and no one knows whether it will inject liquidity
into the market, stop more banking failures and get the market going again. This could all be a huge,
costly mistake that does nothing to solve the problem, but merely places enormous power into the
hands of Mr Paulson.