I don't see where we have until November 5th, based on market fundamentals and the illiquidity going on.
The G7 have been pumping hundreds of billions of dollars into the international market the last few weeks, trying to get some form of liquidity to take place. Nobody is budging. We are worse off right now than we were last Wednesday and Thursday. And I believed then that we would have a bank run on Friday.
The only thing holding all of this together right now is that the American public doesn't even understand what the problem is. They are focused on Republican -vs- Democrat, on overpaid executives of investment banks, and on bums owning homes. Once they realize what is truly going on then the game will be over. Period.
There has been a process in place all of this year to "bring down" the betting pool of the CDS market. They have basically been identying "wash" bets where nobody would be a winner and doing "tear-ups" on the contracts. This has succeeded in bringing the CDS betting pool down to about $54 trillion instead of $62 trillion.
We have run out of time. We need to pass immediate legislation banning CDS contracts on bond insurance. That is what Congress should be doing right now, instead of wasting their time figuring out whether to use a 5 gallon or 10 gallon bucket to bail out the Titanic. This won't fix our immediate crisis, but it will help our chidrens futures.
If a bailout of $10B would get us to November 6, that might be money well spent, though admittedly the ethical dilemmas posed by such an approach would be rather nasty. Probably better to do things earlier, but boy is it going to be touch politically.
The only solution I can see for McCain, and I don't know if he'd have the acting skills to pay it off, would be for McCain to mimic the reporter in Castle of Cagliostro and "discover" some monstrous level of malfeasance (that he already knew about to a significant extent, and tried to warn people of). Come out and tell people that their money has been stolen by crooks who were sheltered and enabled by every Democrat on the Senate and opposed by every Republican on the Senate.
Major bombshell. If McCain could pull it off, the Democrats would be toast, as they deserve to be. Even the welfare-class people who would be happy to see a middle-class person assaulted by a street thug would probably not be happy at the Democrats' allowing middle class people to be robbed by greedy bazillionaires.
Tough to pull off. But the essentially-straight-party-line vote on the 1995 bill might make it work.