Huh. Well, on the one hand:
Until last week, I was in a minority of one in arguing that Mr Paulson was personally responsible for suddenly turning the painful but manageable credit crunch that had been grinding away 18 months in the background of the US economy into a global catastrophe. Mr Paulson’s appearances on Capitol Hill, marked by the characteristic Bush-era combination of arrogance and incompetence, are turning my once-outlandish view into conventional wisdom: Henry Paulson is to finance what Donald Rumsfeld was to military strategy, Dick Cheney to geopolitics and Michael Chertoff to flood defence.
I think that sets a mood.
The only substantive clause in the draft was a swaggering demand for untrammelled power: “Decisions by the Secretary pursuant to this Act are non-reviewable and may not be reviewed by any court of law or any administrative agency.”
When further details of the Paulson plan failed to appear on Sunday it was assumed that the details were being untangled in late-night political negotiations. When there was still no plan on Monday, the view was that Mr Paulson must be holding back the details for his testimony to the Senate Banking Committee the following day. But then, to everyone’s astonishment, Mr Paulson turned up to the committee on Tuesday morning with only the briefest opening statement, which simply repeated what he had already said the week before: the sky was falling and the only way to stop it was to give him authority over $700 billion in public money, to be spent in unspecified ways.
And suddenly the sky did fall down – not on the world economy, but on Mr Paulson. Consider the reactions from American politicians, including Republicans: “Stunning and unprecedented in its lack of detail”… “a $700 billion blank cheque to Wall Street”… “neither workable nor comprehensive”… “foolish waste of massive taxpayer funds”… “eerily similar to the rush to war in Iraq”. Best of all was John McCain’s comment: “When we’re talking about a trillion dollars of taxpayer money, ‘trust me’ just isn’t good enough.”
At first, nobody could quite believe Mr Paulson was incompetent. Was it really possible that the Treasury Secretary had no idea of what to do with this unprecedented financial firepower? Perhaps his silence on crucial issues such as what he would pay for the banks’ “troubled assets” was just a tactical ruse.
But as the cross-examination rolled on, and Mr Paulson just waffled – “we will ask experts to advise us”, “we will get the best and brightest financiers to suggest ideas” – the terrible truth dawned. There was no such thing as a Paulson plan. Not only did Mr Paulson not know what he was doing. He did not know what he was talking about.
While on the other hand:
The Nebraska-based billionaire, whose fortune is estimated at $62bn, threw his weight wholeheartedly behind Henry Paulson’s rescue package for Wall Street, arguing that US industry will “grind to a halt” without action.
“Last week, we were at the brink of something that would have made anything that’s happened in financial history pale,” Buffett told CNBC television. “I’m not saying the Paulson plan will eliminate the problems but it’s absolutely necessary, in my view, to avoid going off the precipice.”
Buffett, whose opinions are hugely influential among millions of private investors in the US, said that if the Treasury acts shrewdly by buying banks’ distressed assets at a competitive price, taxpayers will end up as financial winners.
“TREASURY SECRETARY HENRY PAULSON FEARS BAILOUT DEAL MAY COLLAPSE; PLEADS WITH DEMS, ‘PLEASE DON’T BLOW THIS UP,’ ABC NEWS HAS LEARNED”