Yesterday, the Treasury Department, under the direction of Secretary Henry Paulson, reported that it is “making preparations” to ask Congress for access to the second $350 billion of the Troubled Assets Relief Program (TARP). This comes just one week after Paulson said that he would not be asking for the second TARP installment.
Today, on MSNBC, Rep. Debbie Wasserman Schultz (D-FL) expressed concern that Paulson “seems to be flailing about a bit.” Watch it:
Indeed, this was just the latest in a series of reversals and missteps that Paulson has made while implementing the $700 billion economic rescue program. Here is a roundup of how Paulson has flailed about more than just “a bit”:
Flip-flopped on whether to spend the second $350 billion: Yesterday, it was reported that the Treasury is “now making preparations to ask Congress for clearance to tap into the second half of the massive $700 billion financial markets rescue fund.” However, just one week ago, Paulson said that he did not need the second $350 billion, claiming that “I want to preserve the firepower, the flexibility we have now and those that come after us will have.”
Changed the purpose of the program: Paulson intially said that “the single most effective thing we can do to help homeowners, the American people, and stimulate our economy,” is to buy troubled assets from banks. Paulson promptly abandoned that plan, instead deciding “to reinforce the stability of the financial system by providing sorely needed capital to banks, and even non-bank institutions that securitize credit card, auto and student loans.”
Misled about the stability of the banking system: Paulson announced on November 13 that the banking system “has been stabilized,” and “No one is asking themselves anymore, is there some major institution that might fail.” One week later, Paulson was bailing out Citigroup.
Ultimately, the $700 billion bailout was necessary to avert full-scale economic disaster. Still, as Rachel Maddow opined last night, “The all-over-the-map, reverse-course-at-every-turn approach has been exciting, but exciting in a bad way, when what the financial system needs is predictability and credibility and confidence.”
O’DONNELL: Why shouldn’t we be worried about this massive deficit spending?
SCHULTZ: You know, unfortunately, President-elect Obama is inheriting a pretty huge mess that, you know, if we don’t focus on getting it turned around, then we’re going — going to have an even worse problem and be in this situation longer than — than we have to be. But, you know, I am concerned, I have to admit, that the Treasury secretary, Mr. Paulson, seems to be flailing about a bit. I mean, I’m — you know, when I voted for that $700 billion bailout, you know, I expected that they would be — the government would be buying mortgages and focusing on making sure, at least in part, that people can stay in their homes that are facing foreclosure.
Now he’s abandoned that plan and he seems to be flailing about a bit on where to inject capital into markets. And there is a little bit of a risk that the markets are going to become too dependent on that capital. So that — that does give me quite a bit of concern.
O’DONNELL: Interesting to hear you say that, that you believe the Treasury secretary is flailing about a bit.
Rep. Thaddeus McCotter (R-MI) said that actions being taken by Paulson and Federal Reserve Chairman Ben Bernanke “seem like a comedy act“:
We would have preferred not to see the ‘Who’s on First?’ routine between Secretary Paulson and Fed Reserve Chairman Bernanke because they seem to come by it naturally, whereas at least Abbott and Costello had to practice it to put forward that state of confusion.