QUOTE OF THE DAY....From Brad DeLong, making the same point about Henry Paulson that I did yesterday, but much more colorfully:
My belief is that if Paulson were to stay on he would treat undercapitalized banks like a Goldman-Sachs honcho treats counterparties in trouble: strip them of everything and send them naked into the blizzard to live or die on their own that's what he and Bernanke have done to the preferred and common shareholders of Freddie, Fannie, AIG, WaMu, Wachovia, Bear-Stearns, Lehman, and to the bondholders and counterparties of Lehman...
It's worth noting that when Paulson submitted the initial 3-page bailout bill that gave him czarlike authority to do anything he wanted with his $700 billion, it was a huge tactical mistake. He was treating Congress the way he'd treat a Wall Street adversary, and that was a very bad move. But it doesn't mean that he wanted unfettered authority to make sweetheart deals. It's actually more likely that he wanted unfettered authority to rape and pillage. Nor does it mean he wouldn't have demanded equity stakes in the companies he bailed out. He demanded 80% of AIG, after all, and no one forced him to do that.
But it was still a very, very bad misjudgment. Hopefully he's learned from his mistake.