Critics of the financial regulatory reform bill that looks set to pass the Senate have been knocking the legislation by saying that it would not have prevented the financial meltdown of 2008. “Democrats have crafted a bill that fails to address the origins of the crisis and will not prevent a replay of events in the future,” said Rep. Tom Price (R-GA).

However, not all Republicans are so disparaging of the legislation. In fact, former Treasury Secretary Hank Paulson said in an interview with the New York Times’ Andrew Ross Sorkin that he would have “loved to have” the resolution authority that the bill creates for dismantling failed financial firms. Paulson said that such power would have allowed him to take over Lehman Brothers and AIG, thus stemming the financial panic that occurred in 2008:

“We would have loved to have something like this for Lehman Brothers. There’s no doubt about it,” Mr. Paulson declared…[H]e suggested that had he had resolution authority, he would have been able to take over Lehman Brothers and the American International Group without the financial system crumbling…He said that he believed that if the government had had the authority to take over Lehman and A.I.G., it would have stopped the panic endangering other firms.

Paulson’s comments resemble those of Federal Reserve Chairman Ben Bernanke, who has said that “if a federal agency had had such tools on September 16, they could have been used to put AIG into conservatorship or receivership…That outcome would have been far preferable.” And Paulson’s evident support of the Senate bill is especially interesting considering that it includes almost none of the fixes that Paulson himself recommended for the financial system in early 2008.

Congressional Republicans have continually tried to portray resolution authority as a continuation of the ad hoc bailouts to which the government had to resort in 2008. But in fact, the bill creates a clear process for unwinding big financial institutions without calling on taxpayers to bear the burden. It lays out a process for identifying whether a failing financial institution is too systemically entangled for traditional bankruptcy and, if so, puts it into an FDIC-style receivership, after receiving approval from a panel of bankruptcy judges.

Of course, the ultimate success of the new resolution authority all depends on regulators actually pulling the trigger and using it when the time comes. But at least regulators will have the adequate tools going forward, instead of improvising unsavory fixes like they had to in 2008.

Paulson added that the most important part of the financial reform bill is actually the creation of a council tasked with identifying systemic risk in the financial system, which was lacking from the pre-2008 regulatory structure. However, he said that such a council would have needed to be in place when the subprime bubble first began inflating to be effective in preventing the economic crisis. “We’d have needed the systemic risk regulator up and running by 2005 or so, to recognize the dangers of ever more lax underwriting and intervene,” he said.

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.

Today, President Barack Obama’s nominee for Treasury Secretary — president of the Federal Reserve Bank of New York Timothy Geithner — went before the Senate Finance committee for his confirmation hearing. Geithner “faces a grilling in Congress” after reports surfaced that he failed to pay self-employment taxes on his 2001-2004 returns while working at the International Monetary Fund.

As the New York Times reported, at the hearing Geithner wasted no time in addressing the controversy about his missed taxes. He said his mistakes were careless and avoidable but “completely unintentional.” He apologized to the committee, saying “I should have been more careful.”

The right-wing has been pushing Senate conservatives to block Geithner’s confirmation due to the tax mix-up:

Michelle Malkin: Will any GOP Senator stand up to failout bailout serial tax evader Tim Geithner, or will they all do the lemming dance now and whine about how nobody could see his shortcomings later?

Newt Gingrich: Senate Republicans should make it clear that they will not permit a tax evader to become the secretary of the Treasury.

But when it came to predicting the economic crisis, Geithner has been much more prescient than the man he has been tapped to succeed, Henry Paulson.

In June of 2006, the Senate confirmed Paulson with a simple voice vote. Paulson was called “a very strong choice” and “the right man at the right time” by lawmakers.

Paulson’s tenure, though, was a disaster, and throughout the current economic crisis he consistently maintained that the financial system was “safe and sound.” Geithner, meanwhile, was warning that financial innovation and a weak housing market were threatening to topple the economy. The Wonk Room has assembled a timeline comparing Geithner’s cautionary statements with Paulson’s public insistence that everything was fine. Here is an example:

Geithner: Financial innovation is creating systemic risk.

There are aspects of the latest changes in financial innovation that could increase systemic risk…The complexity of many new instruments and the relative immaturity of the various approaches used to measure the risks in those exposures magnify the uncertainty involved. [Speech at the Global Association of Risk Professionals 7th Annual Risk Management Convention & Exhibition in New York City, 2/28/06]

Paulson: The world economy is stronger than I have ever seen it.

We are fortunate to face our long-term challenges from a position of strength. As a participant in financial markets for more than thirty years, I say with confidence that over the last couple of years, the world economy has been stronger than I have ever seen it. [Speech at CBI National Conference, 11/28/06]

Read the entire report here.

Cross-posted at ThinkProgress.