tragicomix

Do U.S. Policymakers Have a Clue About the Economy?

Thinking over it, no, I do not think it is fair to say Hank Paulson is clueless. The truth probably is, he does not care – because he never believed that there was an effective way for Treasury or Fed or Congress to intervene and cut short the correction in the housing market which would otherwise take many years. So, if there was no way to deal with the mortgage problem, by extension same for the CDO and the rest of the stuff. The only thing that he/Fed could possibly do was to slash interest rates, which they did and then try and prevent big financial institutions from failing which would cause havoc in the financial system. However, that does not explain letting Lehman go and the botched first bailout of AIG.

Perhaps Paulson not only did not care and did not believe that the Treasury had a role, but was also cavalier in taking decisions. Or perhaps he thought he was very clever in throwing Lehman to the wolves – red meat for those who wanted to see blood on Wall Street.