Paulson does the right thing, once again
As much as it scared the stock market yesterday, U.S. Treasury Secretary Hank Paulson was right to reneg on the proposed acquisition of “toxic” assets from U.S. banks. When the TARP proposal was passed by Congress, it was clear that the repercussions of what was to come had not be entirely factored into the battle plan.
Much like the war in Iraq, more thought went into the planning of the mission to save Wall Street than the actual rebuilding program that would have to follow Congressional approval of the $750 billion. As pointed out here last month, Secretary Paulson’s original plan could have brought about at least $50 billion of additional writedowns at Citibank, Bank of America, etc., etc. (see prior post “TARP passes, but brace yourself for the second shoe to drop” October 3-08).
Secretary Paulson clearly realized that to do well by the taxpayers he’d be killing the balance sheets of the banks he was trying to help, much like the leeching technique of old-time medical doctors. The only obvious move was to follow in the footsteps of the British government and begin to slowly acquire increasing stakes in the U.S. banks.
It might have taken awhile, but he’s landed at the right place. To date, the only misstep was not bailing out Lehman; or was it bailing out Bear Stearns and not bailing out Lehman? Or was the mistake bailing out Bear Stearns in the first place?
Regardless, Secretary Paulson is doing the right thing.
Here is the link to piece on Seeking Alpha.