Article: Paulson and the Regulators

The media are full of articles this morning about the disingenuousness of the Bush administration's proffered cure for Wall St. Blues, as designed by former Wall Streeter himself, Treasury Secretary Pat Paulson. Sorry, wrong Paulson; Henry Paulson.

Paul Krugman in the NYT sees nothing but flimflammery, and I tend to agree with him. There is a distinctly "Dilbert" quality to the Paulson plan and, indeed, to the entire Bush era. Still, the juggling of agencies, folding some into others, etc., may have a benefit to those who come next year to deal with this mess. Paulson may have inadvertently given us some crucial information about what we really need to do.

Nelson D. Schwartz and Floyd Norris also of the Times begin their article on the subject with the right foot forward, but continue in what Danny Schecter railed about in SmirkingChimp as lugubrious feldergarb. Well, not quite, Danny, but your C. Wright Millsean sympathies are noted. One wonders though whether Schwartz and Norris were sitting next to the Wall Street Journal authors, Damian Paletta, Greg Ip, and Michael M. Philips, when they were writing these pieces.

What is pronounced "reduce" in the Times becomes "streamline" in the Journal, which is expectable, but not very informative. I don't generally waste my time with the WSJ for this reason. Still, their article brings out the essential truth that the needed reforms to regulation will not be happening overnight, and in fact, will probably take several years to accomplish. So, you might ask, why did Henry Paulson rush these ideas out so suddenly in the wake of the Bear Stearns debacle?

Well, I have two thoughts on this. One, the Republicans and Libertarian "free market fanatics" needed to show that they were conscious and had a clue. Their plan, of course, was to reduce regulations and so with the collapse of Wall St. investment banking immanent, they had to do something that sounded like they want regulation ... but communicated that they really did not, despite the immanent collapse. This provides insight into the ethics of Wall St., by the way. They just don't give a morceau de merde about investors or competitors, except when the principle that they be allowed to do what they want is assailed. The Paulson Plan indicates that they actually do not have a clue. They will fight for deregulation to the last trump, and wouldn't you if your sandbox were about to be overrun with disciplinarians who would keep you from beating on the other kids with your pail and shovel, would keep your dog and cat out of the sand, and would stop your from throwing sand in the eyes of the other kids! In other words, Krugman is exactly correct.

But, getting the Paulson Plan into the public and private discourse on the role of government achieves one thing that everyone who has run a meeting understands: the first draft is crucial because it sets the stage and frames the dialogue. Less obvious is the fact that frames exist within frames, and the Paulson Plan also provides next year's politicians with vocabulary. The vocabulary happens to be "free market fanantic," a dialect of Liberarianism, but we won't notice this until some stalwart like Dennis Kucinich notices late in the day and declares the whole process a farce.

I personally am in favor of a thorough-going review of the whole apparatus, from the Department of the Treasury and outward to all of the agencies involved, including the entire Federal Reserve System. Nothing could be more important to a global economy than the world's strongest economy undertaking a thorough review. The fact that the economy is now irrevocably global is reason enough. The fact that jackasses can run companies like Merrill-Lynch or Bear Stearns is another reason. There is no reason on earth for 300 million people to depend on the goodwill of several hundred moguls on Wall Street for the health of our economy. The economy is us, and we are not Wall St. slaves or indentured to the whims of its CEOs!

JB