Judy Biggert, a Republican from Illinois, had a question for Hank Paulson at today’s House Financial Services Committee hearing: What ever happened to that plan to insure troubled mortgages assets that we included in the bailout bill?
This insurance plan was a bad idea, seemingly ginned up on the fly by Eric Cantor so it would at least seem like House Republicans had an alternative to Paulson’s Troubled Asset Relief Program. It would expose taxpayers to even greater liabilities than the TARP, be harder to administer, and it would do little or nothing to jumpstart credit markets. My bet is that nobody at Treasury has given it a second’s thought since the bill passed.
But Paulson felt he couldn’t say any of that, so instead he gave a deeply unconvincing answer about how Treasury was studying all possible alternatives but he couldn’t talk about any specifics and yada yada yada. He seemed to give a lot of those non-answers today. Ohio Republican Steve LaTourette wanted to know why Treasury and the Office of the Comptroller of the Currency had put the squeeze on Cleveland-based National City and effectively forced it to sell out to PNC. Paulson was a little bit more forthcoming there, refusing to comment on the specifics but saying that Treasury wanted struggling banks to get bought by healthy ones, and that capital ratios (LaTourette kept pointing out that Nat City’s were pretty high) were not always the best measure of a bank’s health. But he still came across as evasive.
Paulson probably didn’t have much choice but to be evasive about those two questions, and he can’t say no to a Congressional request to testify. So he’s stuck there. But he is also in the middle of a big-time media campaign to defend his actions–just today there’s an op-ed by him in the NYT, a long article about him in the WaPo, and an interview with him in the WSJ. And none of it makes him look any better than he did yesterday. He’s unwilling for various reasons to be completely frank about his decisions, yet seems constitutionally incapable of sticking to a couple of talking points and leaving it at that. More than ever, he comes across as revisionist, impulsive, and inadequately prepared.
My tendency is to defend Paulson against his critics. Yeah, he’s made mistakes, but given what could have been in the waning months of an extremely unpopular lame-duck administration with a record of weak cabinet appointments and hostility to the reality-based community, having him at Treasury has been a huge stroke of luck for the country. With TARP, he seems to have averted the worst-case scenario of a financial system collapse. With Fannie and Freddie, he found a way to keep housing on life support that offers at least some protection to taxpayers. He has been a pragmatist, not an ideologue. And he and his not-all-that-big staff have been working 80-hour weeks trying their honest best to fix a mess that really wasn’t of their own making (except in the sense that most of them used to work on Wall Street and it’s all Wall Street’s fault).
Anyway, I still believe all that. But I’m starting to think I could make the case with more conviction if Hank Paulson would just stop talking.