Monday, November 17, 2008

Too late

Over the next two months, Mr. Paulson must impose some coherence and clarity on the bailout. Otherwise he will only fan anxieties and mistrust, which will undermine the effectiveness of his good decisions and amplify the fallout of his bad ones. With markets gyrating wildly, and the economy deteriorating rapidly, the nation needs clear leadership and a sound plan.

After spending the entire length of today’s lead editorial demonstrating just how badly Treasury Secretary Hank Paulson has handled the economic crisis and ensuing attempts at a “bailout,” the New York Times undermines its point with this half-hearted admonition. Honestly, if the Times editorial board knows of a good decision by Mr. Hanky, might they have shared it?

The nation does need clear leadership and a sound plan, but, to date, the nation has gotten neither. As pointed out in this very editorial, any “modest easing the bailout initially brought about in the credit markets is now being reversed over doubts about the Treasury’s stewardship of the plan.” Paulson’s actions have been reactive and woefully behind the curve; he lacks anything like a coherent strategy, and the moves he has taken seem less motivated by an interest in protecting wage-earning Americans than in protecting Paulson’s pals and ideological biases.

There is also zero transparency—something many econ-watchers consider of utmost importance to stabilizing credit markets. . . not to mention the stock market. Beyond the lack of oversight as to what the banks are doing with the billions in bailout cash that they have received (much will end up going to bonuses, balance sheets, and the buy-ups of competing banks), it has now been revealed that there was another $2 trillion (!) dispensed by the Fed that is completely opaque.

Paulson has refused to use any of the TARP cash to help homeowners facing foreclosure, even though that might slow the bleeding and even stimulate some local economies, and now he has also rejected using his precious kitty to help the auto industry. Though it’s true that an auto-industry bailout administered with a similar chaotic attitude and the same lack of rules and requirements would do little in the long run to fix systemic problems in this sector, deciding that Goldman Sachs was “too big to fail” but GM is not is as stupid as it is hypocritical.

Given that record, I have no need to extend the rhetorical lifeline the Times so generously offers. Clear leadership and a sound plan cannot come soon enough, and given the noted rapid deterioration of the economy and the number of Paulson’s remaining days, it probably won’t.

(cross-posted on guy2k and The Seminal)

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