Not since Alexander Hamilton plotted the military takeover of the US government during the administration of George Washington has a Treasury secretary make a a grab for power as bald, naked, frightening, tyrannical or unAmerican as Treasury stooge Hank Paulson made this weekend.
As the capital markets seized up last week after the Lehman bankruptcy, bringing the US banking system to the edge of insolvency, Paulson crafted a plan to commit more than $1 trillion taxpayer dollars to buy any kind of bad asset from the private sector on nothing more than his own personal say so. The bail out proposal Paulson sent to Congress this weekend not only would give the Treasury secretary sole discretion as to what assets to buy, from whom, when, and at what price--as well as the power to hand out contracts to private companies--but also would strip courts of the power to hear challenges to Treasury actions and give Congress no role in oversight after it's committed your money. As NYU economist Nouriel Roubini told Bloomberg News :
"He's saying, `Trust me, I'm going to do it right if you give me absolute control.' "
This isn't the first time we've heard that kind of logic from the Bush administration. It's basically the same line the administration took with respect to weapons of mass destruction in Iraq. During the lead up to the Iraq invasion a do-nothing Republican Congress rolled over, ceding it's oversight responsibilities. And even after the invasion began, as the Administration handed out no-bid outsourcing contracts to private companies in Iraq many of whom, it turns out, were incompetent or corrupt, Congress declined to shoulder it's oversight.
Now Paulson--who began his political career as an aide to Watergate conspirator John Erlichman and whose personal net worth is more closely tied to the fortunes of Goldman Sachs (where he was once CEO) than to the fortunes of the United States taxpayer--expects Congress again to do nothing more than write a check and get out of his way.
Fat chance. Over the weekend Democratic leaders in the House and Senate (Barney Frank and Charles Schumer respectively) began pushing back, proposing checks and balances which are as yet still too meager to truly protect the taxpayers' $1.3 trillion dollar investment. (There needs to be far more oversight than a GAO report every 60 days and an annual report to the public.) Both presidential candidates also chimed in with insistence on real oversight (although John McCain's notion of a bailout junta composed of the likes of Warren Buffet, Michael Bloomberg and Mitt Romney is purely politically and wholly ridiculous). What I'd like to see is a investment committee of the sort that most private equity firms maintain--with two members appointed by congress for every one appointed by Treasury and with at least representative who is a member of congress or is otherwise actually elected by the people directly. This committee would be in charge of determining not only which assets the federal government takes on its books but also the valuation of those assets. It would also report weekly to the House and Senate banking committees.
There are plenty of other things I'd like to make sure I see in this bailout plan. But most of all we must make sure that we don't crown any Treasury secretary King of the US Economy, hand him a trillion bucks and let him prop up his old cronies with your money.