On Saturday, the Bush administration officially revealed its plan for a $700 billion bailout of troubled financial institutions. The New York Times called the plan “stunning for its stark simplicity,” and noted that the administration is “requesting unfettered authority for the Treasury Department.”
Yesterday, Think Progress pointed out that the Bush administration has a history of squandering taxpayer money, but that the bailout proposal has no oversight mechanism. And the man who would wield the “unfettered authority” is Treasury Secretary Henry Paulson, who, prior to the recent financial turmoil, consistently maintained that the U.S. banking system is “safe and sound.”
Last night, Paulson appeared on Fox News Sunday, where he was reminded of an interview six months ago in which he said “I’ve got great confidence in our financial market…Our institutions, our banks and investment banks, are strong.” Watch it:
Some are saying that we should simply trust Mr. Paulson, because he’s a smart guy who knows what he’s doing. But that’s only half true: he is a smart guy, but what, exactly, in the experience of the past year and a half — a period during which Mr. Paulson repeatedly declared the financial crisis “contained,” and then offered a series of unsuccessful fixes — justifies the belief that he knows what he’s doing? He’s making it up as he goes along, just like the rest of us.
Krugman added that, “basically, after having spent a year and a half telling everyone that things were under control, the Bush administration says that the sky is falling, and that to save the world we have to do exactly what it says now now now.”
However, an oversight mechanism is essential to ensure that the bailout benefits more than just the investment banking industry. As David Abromowitz and Andrew Jakabovics wrote for the Center for American Progress, “with appropriate oversight mechanisms, Congress and the public can monitor use of these authorities to ensure that America’s taxpayers, homeowners, and communities—not simply our investment firms—benefit from this extraordinary intervention and that the benefits are lasting.”