Paulson's stumbles

Concern is rising that Sec Treasury Hank Paulson is in over his head and not moving quick enough to shore up the financial system.

Paulson pounded his chest and demanded Congress give him $700 Billion without question. Thankfully, Congress did question and gave him -- over his objection and that of the White House -- the power to purchase equity states in banks themselves.

This week, it seems that is just what they want to do,

Two weeks after persuading Congress to let it spend $700 billion to buy distressed securities tied to mortgages, the Bush administration has put that idea aside in favor of a new approach that would have the government inject capital directly into the nation’s banks — in effect, partially nationalizing the industry.

As recently as Sept. 23, senior officials had publicly derided proposals by Democrats to have the government take ownership stakes in banks.

The Treasury Department’s surprising turnaround on the issue of buying stock in banks, which has now become its primary focus, has raised questions about whether the administration squandered valuable time in trying to sell Congress on a plan that officials had failed to think through in advance.

It has also raised questions about whether the administration’s deep philosophical aversion to government ownership in private companies hindered its ability to look at all options for stabilizing the markets.

Some experts also contend that Treasury’s decision last month to not use taxpayer money to save Lehman Brothers worsened the panic that quickly metastasized into an international crisis.

But Treasury is buying up distressed assets through the back door using Fannie and Freddie to do the buying, which is quicker than setting up a new structure to do the buying. How long before the right-wing using these recent Freddie/Fannie buys to further deride them as failed institutions?