Lack of Financial Regulation Was the Principal Aim...
Yet More DeLong Smackdown Watch: Yves Smith Raises Objection (3) to Dealing with the Financial Crisis

Henry Paulson Begins to Trash His Own Reputation...

Until recently, Henry Paulson was one of the few Bush appointees of whom it could be said that his service in the Bush administration was "without distinction." That itself was an accomplishment: very few of his fellows could say the same of their tenure.

Now it looks as though Paulson is losing that distinction--that he has decided to support Bush's blocking for ideological reasons of reasonable steps to deal with the mortgage crisis.

Kevin Drum reads Peter Gosselin and comments:

The Washington Monthly: PAULSON'S PLAN....Peter Gosselin reports on the Bush administration's response to the credit crisis:

Treasury Secretary Henry M. Paulson Jr.'s blueprint for regulatory reform, officially unveiled Monday, sets the stage for a confrontation with Congress by offering no relief for troubled homeowners and in many instances advocating less, not more, federal supervision of the nation's financial system.

Paulson proposed the broadest restructuring of federal regulatory institutions in 75 years with a call to merge agencies and redraw lines of authority that in some cases go back to the Great Depression. But the plan would put off for years any attempt to create new regulations for the streamlined system to enforce.

As a result, even if the new structure were eventually adopted, it would do little to prevent a repeat of the current crisis or something similar, the Treasury secretary acknowledged.

No surprise there. After all, Paulson created his plan a year ago, well before the current crisis exploded last summer. Far from being a way to rein in banking industry excesses, it was originally a conservative wish list designed to "streamline" the federal bureaucracy and lighten the regulatory burden on Wall Street, which was, um, slowing down the growth of sophisticated new financial instruments that %u2014 that, er, were needed to keep the American financial industry in its place as the leader of the world.

As it turned out, the regulatory burden on sophisticated new financial instruments wasn't quite the problem that needed to be solved, but Paulson didn't let that stop him. He just kept his pet proposals in place, slapped a fresh speech together, and called it a "sweeping" new vision. Then he looked surprised when no one was buying it.

Streamlining the regulatory bureaucracy is probably a good idea. There's certainly no need to fetishize the jury-rigged alphabet soup of New Deal agencies that we rely on today. But just for once, would it kill the Bush administration to address an actual problem, instead of merely using it as an excuse to jam some long-wished-for piece of money-con flim-flam through Congress?

This is disappointing. I was assured that Paulson wouldn't fall into this trap, and was better than this.