Herbert

Op-Ed Columnist
A Second Opinion?
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new_york_times:http://www.nytimes.com/2008/09/23/opinion/23herbert.html
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By BOB HERBERT
Published: September 22, 2008
Does anyone think it’s just a little weird to be stampeded into a $700 billion solution to the worst financial crisis since the Great Depression by the very people who brought us the worst financial crisis since the Great Depression?
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How about a second opinion?
Everything needs much closer scrutiny in these troubled times because no one even knows who is in charge, much less what is going on. Have you ever seen a president who was more irrelevant than George W. Bush is right now?
The treasury secretary, Henry Paulson — heralded as King Henry on the cover of Newsweek — has been handed the reins of government, and he’s galloping through the taxpayers’ money like a hard-charging driver in a runaway chariot race.
“We need this legislation in a week,” he said on Sunday, referring to the authorization from Congress to implement his hastily assembled plan to bail out the wildly profligate U.S. financial industry. The plan stands at $700 billion as proposed, but could go to a trillion dollars or more.
Mr. Paulson spoke on the Sunday morning talk shows about “bad lending practices” and “irresponsible borrowing” and “irresponsible lending” and “illiquid assets.”
The sky was falling, he seemed to be saying, and if the taxpayers didn’t pony up $700 billion in the next few days, all would be lost. No time to look at the fine print. Hurry, hurry, said the treasury secretary.
His eyes, as he hopped from one network camera to another, said, as salesmen have been saying since the dawn of time: “Trust me.”
With all due respect to Mr. Paulson, who is widely regarded as a smart and fine man, we need to slow this process down. We got into this mess by handing out mortgages like lollipops to people who paid too little attention to the fine print, who in many cases didn’t understand it or didn’t care about it.
And the people who always pretended to know better, who should have known better, the mortgage hucksters and the gilt-edged, high-rolling, helicopter-flying Wall Street financiers, kept pushing this bad paper higher and higher up the pyramid without looking at the fine print themselves, not bothering to understand it, until all the crap came raining down on the rest of us.
Yes, the system came perilously close to collapse last week and needs to be stabilized as quickly as possible. But we don’t know yet that King Henry’s fiat, his $700 billion solution, is the best solution. Like the complex mortgage-based instruments at the heart of this debacle, nobody has a real grasp yet of the vast implications of Mr. Paulson’s remedy.
Experts need some reasonable amount of time — I’m talking about days, not weeks — to home in on the weak points, the loopholes, the potential unintended consequences of a bailout of this magnitude.
The patchwork modifications being offered by Democrats in Congress are insufficient. Reasonable estimates need to be made of the toll to be taken on taxpayers. Reasonable alternatives need to be heard.
I agree with the economist Dean Baker, co-director of the Center for Economic and Policy Research in Washington, that while the government needs to move with dispatch, there is also a need to make sure that taxpayers’ money is used only where “absolutely necessary.”
Lobbyists, bankers and Wall Street types are already hopping up and down like over-excited children, ready to burst into the government’s $700 billion piñata. This widespread eagerness is itself an indication that there is something too sweet about the Paulson plan.
This is not supposed to be a good deal for business. “The idea is that you’re coming here because you would be going bankrupt otherwise,” said Mr. Baker. “You’re coming here because you have no alternative. You’re getting a bad deal, but it’s better than going out of business. That’s how it should be structured.”
The markets tanked again on Monday as oil prices skyrocketed. Time is indeed short, but alternative voices desperately need to be heard because the people who have been running the economy for so long — who have ruined it — cannot be expected to make things right again in 48 or 96 hours.
Mr. Paulson himself was telling us during the summer that the economy was sound, that its long-term fundamentals were “strong,” that growth would rebound by the end of the year, when most of the slump in housing prices would be over.
He has been wrong every step of the way, right up until early last week, about the severity of the economic crisis. As for President Bush, the less said the better.
The free-market madmen who treated the American economy like a giant casino have had their day. It’s time to drag them away from the tables and into the sunlight of reality.