Word: paulsons
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...first formal public defense and explanation of his actions since the dust settled from the financial panic of late September and early October, and Treasury Secretary Henry Paulson had clearly been thinking about it for a while. Normally a believer in brevity, especially at press conferences, he arrived in the Treasury press room Wednesday morning with a 3,500-word speech prepared. He then proceeded to read the whole thing, taking a few big swigs of water along the way, before hoarsely submitting to questions...
Over the past two months, Paulson's public image has taken quite a beating. The former Goldman Sachs CEO entered September as the can-do dealmaker who seemed to have finally gotten the yearlong mortgage crisis under control. Now, after the expensive rescues of Fannie Mae, Freddie Mac and AIG, the failure of Lehman Brothers, and the painfully dramatic struggle to get a $700 billion financial bailout bill through Congress, he is a much-diminished figure. He has zigzagged and he has waffled and he has backtracked. His decisions and his motives have been harshly questioned on Capitol Hill...
First, though, Paulson felt called upon to defend what he has done. "The actions taken by Treasury, the Federal Reserve and the FDIC in October have clearly helped stabilize our financial system," he began. "Before we acted, we were at a tipping point." He's right about that. We'll never know just what horrors we might have tipped into (Paulson's less-than-evocative phrase for what could have been was "broad systemic event"). But it's clear that financial markets are much calmer - if not happier - than they were in early October...
...possible that the panic never would have happened if Paulson and Federal Reserve officials hadn't allowed Lehman to fail. Although, given how much criticism they got for their semi-bailout of Bear Stearns in March, it's easy enough to see where that decision came from. Less easy to understand is why Paulson initially stubbornly insisted that the bailout bill be structured as an asset-purchase plan - it's still called the Troubled Asset Relief Program, or TARP - rather than as a straightforward recapitalization of troubled banks. Treasury has since switched to the latter approach, so far putting...
...switch? "The facts changed and the situation worsened," Paulson said during the Q&A. He kept coming back to that phrase, "the facts changed," in what seemed to be a conscious reference to economist John Maynard Keynes' famous line, "When the facts change, I change my mind." As Paulson put it in an answer to another question, "I will never apologize for changing the approach or strategy when the facts change...