Do we really need a $700 billion bailout?

I'm thinking that the Paulson/Bernanke Plan, which would give Treasury the authority to buy up to $700 billion worth of troubled securities, is not really necessary. Brian Wesbury made a similar point yesterday in this article. The more I research the problem, the more apparent it becomes that clumsy accounting rules have made a bad situation (the decline of housing prices and the subsequent default of lots of mortgages) worse. Institutions other than banks that hold distressed mortgage-backed securities are required to value them at their mark-to-market value. Banks can opt to hold them in a special category that doesn't require mark to market valuation, which is one big reason that Goldman and Morgan Stanley wanted to become banks. This value is currently being determined by distressed sales of these securities, and thus the prices are in many cases much less than the value that could be realized by holding the security to maturity. Why not allow firms to value the securities based on some other method? That is almost exactly what Paulson and Bernanke are pushing for, but they don't take the next logical step. They envision Treasury sponsoring some sort of auction system that would attach more reasonable values to these securities. If Treasury were willing to pay that price, then it would give everyone a firm basis for using that value in their mark to market accounting.

Why does Treasury have to buy the securities? Isn't there some mechanism that would accomplish the same thing without requiring Treasury to become a major holder of mortgage securities? Wesbury suggests that Treasury could sell insurance to companies that would backstop their security valuations, among other ideas. Surely some clever rocket scientist out there can come up with a good plan that doesn't socialize a large portion of mortgage industry.