With his latest policy switch to buying stock in banks and other companies, Henry Paulson has more zigs and zags to his credit than a fox trying to escape a pack of hounds.
The fox and the hounds, of course, have a clear idea of what they want to do and how they want to do it, which is more than you can say of Paulson. Sums of incalculable size are being spent or pledged by Paulson and his playmate, Ben Bernanke, chairman of the Federal Reserve Board, and nobody outside their organizations, or maybe inside them either, knows who got what, how much they got and under what conditions they got it.
In the past couple of months Bernanke has loaned out $2 trillion to unnamed companies under eleven different programs, all but three of which have been slapped together in the past fifteen months of financial crisis. To repeat, we do not know who got this money or what collateral was put up in return for the loans or what conditions were attached to them.
The sums involved are almost three times as large as Paulson’s $700 billion muddled bailout efforts that Congress voted for last month. Bernanke does have the legal authority to pass out these trillions without Congressional authorization and without explanation, but secrecy breeds suspicion and loss of confidence.
These officials preface every speech by talking about “transparency,” their favorite word, at the same time they are handing off $2 trillion and they won’t say to whom, leading Bloomberg News to file suit under the Freedom of Information Act.
Paulson has made off with $50 billion to give to AIG for the purpose of setting up a special entity where the company’s lousiest loans are to be kept off the books and the unknown debtors protected. When asked about this by the New York Times, Lynn E. Turner, who sits on the Treasury Department’s Advisory Committee on the Auditing Profession, complained that “We’ve had way too many things here that nobody knows anything about…. That’s why no one has faith in the capital markets.”
Paulson appears to have given away, invested, loaned or lost about $300 billion of the first $700 billion Congress gave him, but he has lost more than money: nobody believes him or Bernanke anymore.