As of this writing, the modified Paulson plan has been voted down by Congress and the Dow has taken the largest one-day plunge in history. All of this could have been avoided as recently, even, as a few weeks ago. It could still be solved, but it's going to take at least one more upgrade for the Paulson program to get it to work.
First there was Paulson 1.0: The taxpayers of America give the secretary of the Treasury $0.7 trillion, which he then uses to buy vast swaths of mortgage, auto and school loan paper. Forget 'czar,' Paulson becomes some kind of global credit market pharaoh, dispensing diktats by mere decree. "So let it be (under)written, so let it be done." He'd have been a little like Eisenhower on D-Eve, but without (to my knowledge) the power to actually take human life.
Maybe that plan was a little too ambitious.
Then there was Paulson 1.5. The same as above, except more so. The secretary would be forced (like Caesar Augustus) to share his powers with an oversight board. But regarding government power, the expansion was to be expanded. Any company benefiting in any way from the plan would have its top management compensation schedules set by the government. Given the sheer size of the bailout, this would affect a very high proportion of the U.S. financial industry.
In addition, the government was to be given shares of stock in the company, with no limit set--that means board seats. The hard left shock troops of groups like ACORN would have been put on the government dole, and the left would be free to conduct agitprop and intimidation on the middle class' dime. Like Lenin, Barney Frank would have seized the "commanding heights" of finance in a single move. Unlike Lenin, he would have done it without firing a single shot.
Paulson 2.0 cut the Bolshevik stuff out of the legislation. ACORN subsidies? Gone. Voting shares in U.S. companies? Gone. CEO compensation caps? Mostly gone. In consultation mainly with House Republicans and a few "opinion molders" such as yours truly. The size of the expenditure was also cut. Some deregulatory measures were added, such as giving the SEC the authority to suspend the tremendously destructive mark to market accounting mandate. Score one for Kudlow, Forbes, Wesbury and a few lesser "molders" like Bowyer. We harped on it; Paulson listened.
But Congress didn't listen. They turned it down and the markets are imploding. Thank you, populism. Thank you, Newt Gingrich. Thank you, talk radio. Thank you, Lou Dobbs.
