Credibility Crisis Do You Have Faith in Henry Paulson?
Byline: Bloomberg News
Henry Paulson became Treasury secretary 28 months ago, when he was at the top of the financial world: Wall Streets best-paid chief executive officer, capping his career with a high-profile sojourn in public service.
Today, two months before he leaves office, some say Paulson is a reduced figure, damaged by the financial-market meltdown that happened on his watch and by the governments struggles to respond to it.
Like many others who have served in President George W. Bushs administration among them former Secretary of State Colin Powell and former Treasury chief Paul ONeill Paulson, 62, of Barrington Hills, will leave office casting a smaller shadow than when he arrived.
"Paulsons credibility has certainly been substantially diminished," said Peter Wallison, who was general counsel at the Treasury under former President Ronald Reagan and is now a fellow at the American Enterprise Institute in Washington. "There has been a
lot of shifting back and forth and he clearly hasnt thought through much of these policies. He has lost a lot of confidence from the market from all of this."
The latest blow was his Wednesday announcement that the Treasury is abandoning his plan to buy devalued mortgage assets the one he unveiled dramatically just eight weeks ago and defended against congressional and market skeptics.
"This is a flip-flop, but on the other hand, when they first proposed the thing, they didnt really know what they were doing," said Bill Fleckenstein, president of Fleckenstein Capital Inc. in Seattle and author of the book "Greenspans Bubbles." Paulson has pushed some "cockamamie schemes," he said. "So one has to ask: Does he have any clue?"
"Hes ended up really in kind of a hair-on-fire thing," said Stephen Stanley, chief economist at RBS Greenwich Capital. "Particularly in his position, of somebody who was going to be a government official for a very short time and then ride off into the sunset, its been very different from what he had in mind."
The Treasury chief Wednesday said he had no regrets over reversing his plans for the bailout program.
"I will never apologize for changing a strategy or an approach if the facts change," Paulson said at a press briefing in Washington. …