International public goods? Public bads?

Among the potential sources of tension is the Treasury’s ultimate
decision on whether it will buy troubled mortgage-backed securities
from non-American banks. European banks, like UBS, invested heavily in such securities.

“If
Paribas has bought a mortgage-backed security, why can’t they present
it to Treasury?” Mr. Truman said. “If the government is going to do it
for the American banks, they should do it for everyone.”

But that
could provoke a strongly negative reaction from lawmakers on Capitol
Hill, who already protested that other countries should chip in for the
$85 billion rescue of the insurance giant American International Group, because it has operations in those countries or has insured their banks.

“Are
the taxpayers in the United States going to bail out all the banks in
the world?” said Allan H. Meltzer, a historian of the Federal Reserve.
“I just don’t know how this works out.”

Here is the story.