WASHINGTON -- Treasury Secretary Henry Paulson went to Capitol Hill seeking $700 billion. He got an earful. Now, $700 billion is a serious sum, and Congress has the fiduciary responsibility to make sure the money it appropriates goes for a good cause. But from the indignant congressional demands for a laundry list of quid pro quos, you would have thought Paulson wanted it for his personal use.
In fact, Paulson is a lame duck. In four months, he is gone. Paulson is asking for the money not for self-aggrandizement but for the same reason Fed Chairman Ben Bernanke and the markets are asking for it: to prevent the American economy from going over a cliff.
Some disdain that assessment as hypothetical. Paulson and Bernanke, who actually peered into the abyss on Black Thursday (Sept. 18), think otherwise. They're not infallible, but prudence dictates not risking the economy on the opposite bet.
The stock market dive and the seizing up of the credit markets convinced them that their ad hoc Bear-yes, Lehman-no rescue of investment firms had not only reached a dead end, but was actually making things worse. It had added uncertainty to a situation in which pre-existing uncertainty was already causing panic.
Hence the need to go below the institutional superstructure to the underlying toxic assets, which Paulson proposes to take off the private sector's books by having the government buy them for, yes, $700 billion.
Congress has every duty to be careful with taxpayers' money and to suggest improvements in the administration plan. But part of Congress' reaction has nothing to do with improving the proposal and everything to do with assuaging the rage of constituents -- even if it jeopardizes the package's chances of success, either by weakening it or by larding it up with useless complicating provisions designed solely to give the appearance of sticking it to the rich.
Window dressing such as capping pay packages, which the Bush administration has already caved in to. I've got nothing against withholding golden parachutes from failed executives. But artificially capping the pay of people brought in to lead these wobbly companies back to health is a fine way to tell talented executives to look elsewhere for a job. In the demagogic parlance of this election year, it is a prescription for outsourcing our best financial minds to London and Dubai.
The mob is agitated, but hardly blameless. While the punch bowl -- Alan Greenspan's extremely low post-9/11 interest rates -- was being held out, few complained about cheap loans and doubling home values. Now all of the sudden everything is the fault of Wall Street malfeasance.
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