Why Hank Faces Tough Questions about His $700 Billion Bailout Plan; Grilling: US Treasury Secretary Henry Paulson Stands Up from the Witness Table after Testifying before the Senate Banking Committee about His Proposed $700 Billion Bailout. on the Right of Picture Is Federal Reserve Chairman Ben Bernanke

The Evening Standard (London, England), September 25, 2008 | Go to article overview

Why Hank Faces Tough Questions about His $700 Billion Bailout Plan; Grilling: US Treasury Secretary Henry Paulson Stands Up from the Witness Table after Testifying before the Senate Banking Committee about His Proposed $700 Billion Bailout. on the Right of Picture Is Federal Reserve Chairman Ben Bernanke


Byline: JAMES DORAN

Hank The Hammer Paulson, US Treasury Secretary and former Wall Street Titan, is to some an unstop-pable hero capable of saving his country from certain economic doom. But to others his agenda strays so far from the basic rules of the free market that he is an un-American leftist agent forcing a socialist agenda on a fearful and powerless populace.

While such a portrayal of the former All-Ivy-League American football star, long-time donor to the Republican Party and ex-chief executive of Goldman Sachs sounds ridiculous, just listen how some of Paulsons former friends are describing his $700 billion bailout plan.

Senator Jim Bunning, a Republican from Kentucky, called it socialism and un-American shortly after declaring the free market for all intents and purposes is dead in America. Others have taken to calling him Comrade Hank and a communist.

But behind all this Cold War era rhetoric lies a certain amount of truth. If Congress gets its way and the US govern-ment takes a Golden Share as collateral from all those firms who want to offload toxic mortgage-backed derivatives into Treasury coffers, it will mark the biggest financial services nationalisation programme in history.

Plus, if the US Treasury gets involved in limiting boardroom pay, just watch the bright young MBAs depart for Dubai.

These seemingly extreme measures are not Paulsons own preferred ideas, though. They are provisions he is willing to accept to get his $700 billion rescue package through Congress in a hurry.

They are bi-products of his hastiness to press on with his plan coupled with a seeming disregard for the consequences of his actions.

Paulson means well, but each of his good points is overshadowed by a bad point. In the same way Lehman Brothers had its good-bank bad-bank elements the US Treasury seems to be have good-Hank bad-Hank for a boss.

It is very good, for example that he knows Wall Street well. He knows how bankers think and, more importantly, he knows their businesses inside out, making it harder for them to lie to him.

But it is also bad that Paulson is so close to the big financial industry players, especially to Goldman, as it makes the bailout he is offering look like a get out of jail free card for his old chums.

It is also a good thing that Paulson acted so quickly to decide the fate of Bear Stearns, Lehman Brothers, AIG, Fannie Mae and Freddie Mac. Had he delayed we might have faced even greater market turmoil. …

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Why Hank Faces Tough Questions about His $700 Billion Bailout Plan; Grilling: US Treasury Secretary Henry Paulson Stands Up from the Witness Table after Testifying before the Senate Banking Committee about His Proposed $700 Billion Bailout. on the Right of Picture Is Federal Reserve Chairman Ben Bernanke
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