The Best Explanation so Far for Paulson’s Bailout Behavior
Ever wonder why Treasury Secretary Henry Paulson seems to be giving away the store to Wall Street these days, granting insurance giant AIG a second bailout and allowing American Express to pretend it’s a bank so it can get government money, too?
The question crossed my mind after New America Foundation’s Ellen Seidman described as “really inept” a news conference on Tuesday by Treasury, Fannie Mae and Freddie Mac, to announce a new program to streamline loan modifications. Seidman said Treasury completely oversold the plan, to make it seem like it would cover more mortgages than the plan actually called for. Then, to make it worse, the Treasury spokesman ran out of the briefing room to avoid answering questions.
Felix Salmon at Portfolio seems to have an explanation for all this, and it’s one that totally makes sense to me. Paulson is a lame duck, and the folks at Treasury are going to do whatever they feel like before he leaves office. From Salmon
There does indeed seem to have been a visible change in Treasury policy since the election. Until that point, it cared a little about optics. Now, it’s giving monster bailouts to the likes of AIG and American Express; it’s dragging its feet on homeowner relief; and in general Hank Paulson’s Wall Street buddies seem to be getting much better access than anybody in Detroit. And no one’s even trying very hard to defend these actions in public: they know they’ll be out of a job in January anyway, so they’re just doing what they want to do and what they feel is right, without caring much whether anybody else agrees with them
So much for those warm and fuzzy stories about how the Bush Administration is working hard on a smooth transition.