What Was Paulson Begging For?

It's the defining moment of Thursday's breakdown in negotiations:

In the Roosevelt Room after the session, the Treasury secretary, Henry M. Paulson Jr., literally bent down on one knee as he pleaded with Nancy Pelosi, the House Speaker, not to "blow it up" by withdrawing her party's support for the package over what Ms. Pelosi derided as a Republican betrayal.

"I didn't know you were Catholic," Ms. Pelosi said, a wry reference to Mr. Paulson's kneeling, according to someone who observed the exchange. She went on: "It's not me blowing this up, it's the Republicans."

Mr. Paulson sighed. "I know. I know."

But if it was the Republicans' fault, why was Paulson pleading with Pelosi?

The answer is that the Democrats have a majority in the House, and that with the bipartisan support in the Senate, and the full backing of the White House, the bailout bill could, in theory, be pushed through even without the support of the House Republicans.

Pelosi, however, made it clear all along that she wouldn't do that: without bipartisan support, no deal. Politically, her decision makes all the sense in the world: she doesn't want to let the Republicans have their cake (a nice $700 billion bailout bill) and eat it (the luxury of criticizing Washington pork and being able to say that you voted against it). From an economic perspective, however, Pelosi's decision could be very harmful. And so Paulson was making a last-ditch, desperate effort to ask her to change her mind -- since he clearly felt he was closer to her than he was to the House Republicans. Maybe it's a Rich Coastal Elite thing.

Comments

[buyitcheap:]

This is funny. Consider the metaphor Pelosi's using: when a Catholic genuflects in church, it's before G*d. Obvious how she viewed herself in that exchange... :-) I mean she's got power, but come on...

2008 Sep 26 09:52 AM

[Al-USA:]

From an economic perspective the the entire bailout appears to be a fraud. Or rather, it appears to be a blatant attempt to fleece the American taxpayer.

I am disappointed, though not entirely surprised, that the "populist" Obama has not come out publicly in defense of the average American on this bailout for billionaires. C'mon Obama, you are showing your true colors if you don't appose this attempt at socialism for billionaires and capitalism for the rest of us.

The following articles elucidate the fraud that the bailout will enable.

www.nakedcapitalism.co...

2008 Sep 26 08:28 PM

[Steven Hansen:]

actually, i go with not doing anything without a consensus. if the path is not clear enough and a proposed solution is not obvious - do not act.

there is a large and knowledgeable group of people opposed. i have heard no compelling evidence that this will in any way stimulate the economy. further, the abuses which caused this crises have not been addressed.

we are in a recession - the government not only will not admit it but seems to be ignoring the massive collapse we are now witnessing. the markets did not plunge on friday even to very negative news.

there are times when no decision is the correct decision.

2008 Sep 27 05:55 AM

[I need a ba...:]

There was no bailout announcement during the failures of Lehman, Freddie, Fannie, AIG etc. But when Goldman started to drop toward $100 per share there was the bailout idea / announcement by Hank Paulson / George Bush. Why did the bailout come at this time? It is because Paulson owns $500 million of Goldman stock. If you were going to lose that kind of cash you would bow down / get on one knee to whomever you thought could save your ass!!!

2008 Sep 27 09:09 AM

[formerhawk:]

user270430 And the fraud associated with this is going to be more than the fraud associated with the rest of the federal budget? Case in point- medicare.

2008 Sep 27 10:20 AM