Paulson Should Remain Treasurer Through the Elections 13 comments
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As most of you know by now, Treasury Secretary Henry Paulson just orchestrated the largest government bailout in history. While many investors, politicians and taxpayers may dislike the recent actions by the federal government, most know that Paulson felt that he had no other option. While the markets largely applauded Paulson's actions (initially), a considerable amount of uncertainty still exists with regard to the mortgage markets and financial institutions.
Since there is nothing that markets hate more than uncertainty, one way to abate risk in the mortgage and financial system would be for the current presidential candidates to announce that they intend to retain Paulson as Secretary of the Treasury. After all, letting Paulson leave the Treasury in January would be like a football couch leaving his team at halftime in the Super Bowl.
The current Fannie and Freddie rescue plan is essentially a stopgap measure for the current crises through December 2009 via the secured lending facility. Given the recent market volatility and vagueness of the bailout, it is clear that the execution of Paulson's plan and other further action will require significant insight from government officials. It would be irresponsible of the next President to place those responsibilities on a newly appointed Treasury Secretary and transitioning federal government.
Additionally, Paulson has become the face of American economic policy ahead of both Bernanke and President Bush. From the extensive coverage of this crisis by the media it seems that investors have come to accept and are comfortable with Paulson's new role dictating the economy. An extension of Paulson's term will undoubtedly ease nervous investors at a time when market doubt is high.
Also, through this crisis, Paulson has exhibited certain qualities citizens desire for positions of influence. It would have been quite easy for Paulson to delay any drastic measures until he left office. This approach would have shielded his legacy with the public from the eventual market downturn. Instead, as the New York Times reported, Paulson took an active role to find a solution to this mess before the next administration and Congress commenced.
Now Paulson is the face of this bailout and will ultimately incur the blame or praise depending on the plan's success or failure. Secondly, I believe Paulson genuinely tried to put the taxpayers first. Granted, the overall bill to the taxpayers could be in the hundreds of billions of dollars, but a large collapse in the housing and financial markets could have been much more costly.
Traditionally, presidential candidates have waited until they were elected to announce their cabinet selections. However, today we face extraordinary circumstances that require extraordinary actions. Given Paulson's experience on Wall Street (for example as Goldman's CEO) and deep knowledge of the current situation makes him a logical choice for Treasury Secretary in the next administration.
Since market stability and investor confidence are paramount for the American public and government, announcing Paulson as Treasury Secretary over the next political cycle may eliminate one element of uncertainty in the market and could buttress this Fannie (FNM) and Freddie (FRE) bailout in the long run.
Stock position: None.
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This article has 13 comments:
The only time I leave my football couch is to get another beer.
In other words, confidence would be inspired by repudiating everything Paulson stands for. Keeping him would inspire fear and, with luck, a revolt.
I would add I have gone out of way to read a great deal of information past and present to provide a stronger understanding of this situation prior to coming to my conclusion. I hope you have done the same. These are interesting and frightening times when understanding the freedoms that were provided to us are protected from government intervention
If Bush is elected for a third term (that is if McCain is elected) then Paulsen might possibly be retained (not likely however) but but if Obama is elected it would be unprecedented.
The crypto-Republican Bill Clinton kept right winger (Ayn Rand disciple) Alan Greenspan as fed head but I think Obama might be tempted to signal "change" by selecting someone else for that post as well.
These enormous bailouts will only kick the can into 2009; if that long. America is bankrupt. PERIOD. Instead of digging deeper we need to restructure our debt before we completely collapse or our "leaders" get us into WWIII.
Call congress and demand prosecution of these white collar crimes and criminals. The financial losses will be nothing compared to a complete loss of confidence in "free market" capitalism and the US of A.
But, supposing he did, he would surely criticize others for saddling the new enteties with social programs to prop up and sell homes to more people unable to financially handle the responsibility. Even though he knows that will be the inevitable result of taking the entire mortgage market and leaving it in the hands of political whims. He'll say, "It's not my fault government can't handle mortages right." And we will say, "Then why did you socialize it?"