In an essay to be presented tomorrow, former Assistant Secretary for Economic Policy Phillip Swagel outlined his experiences working for the Bush Treasury Department during the onset of the economic crisis. While claiming up front that the paper “will inevitably be seen as defensive,” Swagel wrote some serious critiques of Treasury’s actions in combating the rapidly failing economy.
Perhaps most telling was his claim that Treasury under then Secretary Henry Paulson was plagued by “chronic disorganization” that hampered the response to the crisis:
Other aspects of the decision-making were self-imposed hurdles rather than external constraints. Notable among these hurdles was chronic disorganization within the Treasury itself, and a broadly haphazard policy process within the Administration (and sometimes strained relations between Treasury and White House staff) that made it difficult to harness the full energies of the administration in a common direction.
With regard to Paulson’s now infamous TARP reversal, Swagel claimed that Paulson “truly intended to buy [toxic] assets,” but only because he believed it was politically unfeasible to suggest injecting capital into banks — which, of course, is what he eventually did:
The Secretary truly intended to buy assets—this was absolutely the plan; the TARP focused on asset purchases was not a bait and switch to inject capital. But Secretary Paulson would have gotten zero votes from Republican members of the House of Representatives for a proposal that would have been portrayed as having the government nationalize the banking system. And Democratic House members would not have voted for the proposal without the bipartisan cover of votes from Republicans.
At the time, we noted that Paulson seemed to be flailing about, with a series of misguided attempts to get a handle on the tumbling economy. This account from Swagel does little to dispel that notion.