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Paulson's Record
PAULSON'S RECORD....Ezra Klein has an eminently fair and nonshrill critique here of Henry Paulson's handling of the ongoing credit crisis. I'll just add one thing. Paulson's reluctance to push the trigger on capital infusions for banks is understandable, even if it was wrong, but his resistance to having even the power to recapitalize banks is genuinely weird. After all, before the latest phase of the crisis hit, Paulson and Bernanke had spent months urging banks to raise private capital to weather the storm. Both men knew perfectly well that bank capitalization was an issue. And before he introduced his version of the bailout bill, Paulson had twice previously bowed to reality on government takeovers and recapitalizations, first in the case of Fannie and Freddie, and second in the case of AIG.
Given all this, his continuing resistance to the idea is difficult to fathom. His caution can perhaps be written off to background and ideology, but not his flat rejection of even being given the authority. I'm not sure what the explanation is.
He is reluctant for Obama's Secretary of the Treasury to have that authority.
Exactly; Catfish's explanation seems obvious.
You guys beat me to it. Maybe if this was 2006 or 2007, he would have included the ability to do equity infusion in his original proposal. But given the time frame, he knew he was writing legislation primarily for the next administration, which was likely to be Democrat and was inevitably going to be more interventionist in ideology than the current one (just by nature of the circumstances of it coming into office). So he offered up his minimalist bill.
He thought he could resist the inevitable pressure to recapitalize/nationalize better if he didn't have the authorization. After all, he didn't want to do it.
What doctor jay said. I think Paulson would actually like to see less of a bailout, with some big banks being allowed to fail. Post-Lehman, and with the Europeans having made it clear that no big European bank will be allowed to fail, he is bowing to the inevitable.
I disagree with Kevin and Catfish.
It is ideology. Note that if he has the power, he would be expected to use it in this crisis. If he doesn't have it, he can say it is out of his jurisdiction, and he can't do anything. Note, that nationalization of the banks is an EXPLICIT admission that financial capitalism has failed.
Catfish, I disagree simply because of the above. He doesn't want to admit that his career path involved ripping the economy off to hundreds of billions and fails without govt backing.
I think the first comment gets at part of the issue, but I think there's also a simpler explanation.
Paulson isn't freelancing. He's representing the Bush Admin. And their political hacks know full well how effectively their party base has been trained to growl and slobber at the merest hint of "socialism." They didn't want to put a bill before the House GOP that gave the Treasury the authority to take an equity stake in banks.
They wanted to do things the Bush way -- claim whatever ad hoc suthority you want on any given day and answer to no one.
His caution can perhaps be written off to background and ideology, but not his flat rejection of even being given the authority.
Sure his ideology explains it. He was playing chicken with the economy, and he felt comfortable doing so because he believes the market will magically find its own solution.
Paulson doesn't want to recapitalize the banks. And more, he believes that if he doesn't actually have the power to do so, free market magic dictates that someone on the private side will innovate some magic solution or, JP Morgan style, cough up the dough. It's actually helpful to the situation if he can't come to the rescue--it forces the financial industry to pull itself up by its bootstraps!
But he's terrified now because he's realizing that his ideology is wrong. There is no deus ex marketa, and what he does actually matters. The default setting in this situation is not for the situation to correct itself, but for the financial industry to lead the economy over a cliff.
It's taken him a while to come to terms with this. Let's hope he didn't figure it out too late. God bless Gordon Brown.
Ezra's first sentence: To say Hank Paulson has not done a good job during this financial crisis may be going too far.
This is why dems lose elections. It is patently obvious to anyone with a brain that Paulsen has done an absolutely terrible job. I mean, what could he have done that would have been any worse?
Had his nonsensical advice prevailed, the crisis would be much worse. He's been as bad as Brownie, for god's sake. Saying so isn't "shrill," it's common sense.
The first commenter is mostly right, but also don't forget where Paulson is coming from (and where he's likely going back to): the investment banking world. Having the *government* step in and recapitalize is much worse than private investors from the point of view of the people running the banks. The government might want to limit executive salaries and compensation, after all.
It may be that Dubya / Cheney won't let him.
Here you have a logical man who is subservient to an autocratic and illogical man.
The logical man does something illogical.
What are the odds that he is being ordered to be illogical?
Pretty good, I am guessing.
Gandalf wouldn't hold the ring.
Stop! You're all right. It's ideology plus he doesn't want an Obama Treasury secretary to have the authority plus he is but a tool of the Bush administration.
plus if he has the power, we may expect him to use it. These guys in BushLand all hate accountability.....
Rank hypocrisy. Had Paulson asked for such powers - and if one looks back at the howling on Left blogs in the US it is clear - it would have been all "a power grab."
Nothing Paulson does will be "correct" in the howling Leftists view, if he does X, then Y is right. Of course at some level this is understandable given the utter corruption and idiocy of the Adminstration he is part of, but a bit of rationality might perhaps intrude here. Doubtful, but necessary.