The biggest problem Paulson faces, though, is that the American people don’t seem to have understood that the crisis on Wall Street could spread to Main Street with very painful consequences. “We just haven’t communicated as well as we need to,” Paulson acknowelged this morning. “The average American looks at this as being about Wall Street, and they’re angry, and I’m angry too. There have been huge excesses and flaws in the system, but the average American doesn’t understand the implications this has for them: money needs to flow through the system so that every American business virtually every day can operate the way it needs to.”
Paulson faces other problems on Capitol Hill too. Both parties in Congress are by now deeply skeptical of any new Administration demands for increased executive authority and are vehemently pushing for more oversight of how Treasury will manage the bailout. The Paulson plan is bigger in that regard than just about anything Bush asked for in the war on terror. Section eight of the proposal he sent to Congress says, for example, “Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.”
Senators and Representatives feel most keenly uncomfortable about the nasty politics of the deal. In an election year dominated by a bad economy, it’s not good to throw huge money at a bunch of Wall Street firms, especially when each party is worried the other is going to bluff and ultimately try to use the deal as a populist rallying cry. This is compounded by the fact that Paulson just happened to lead one of the biggest market players, Goldman Sachs, before coming to Treasury. In that role, he acknowledges, he placed a lot of the bad debt that the now defunct Fannie Mae and Freddie Mac were peddling. “Yeah, I and everyone else placed Fannie and Freddie debt,” he says, but “We didn’t create this system and this was a mess that had to be cleaned up.” He also acknowledges that he put the former Fannie Mae head, Jim Johnson, on the board of Goldman, and that Johnson chaired Paulson’s compensation committee.
All of this, however, will not be enough to blow out the deal, because the consequences of a collapse in the so-called shadow banking system would be much worse.
Paulson should be under investigation by the FBI. He certainly shouldn’t be “leading” anything.
You got, it, S&T;! Paulson is the former head of Goldman, Sachs, and is Wall Street’s ‘man on the inside’ of this faltering Administration.
Gee, if and when some kind of bailout passes, do you think he’ll go straight back to Wall St, to be paid millions upon millions to help ‘straighten out’ the mess he and the other fat cats got us into? Do ya think?!? (sarcasm very much ON).