Steven Pearlstein makes a good point: Why should we trust Paulson and Co. with an enormous amount of taxpayer money when they haven’t admitted that they made mistakes in the past, much less explained what they’ve learned from them? Keep in mind that Paulson soft-pedaled the potential crisis for months (see Matt’s handy graph here) and thus far hasn’t really expressed an understanding for what most economists identify as the fundamental problem underlying the crisis: the practice of allowing investors to over-leverage capital resources on bad bets, made worse by compromised bond-rating agencies. Krugman notes that Treasury officials haven’t even explained what their theory of the intervention is!
Tonight President Bush makes a speech on the issue; Congress should demonstrate some backbone and not give in to what will surely be the demand: Cash up front, please.
–Tim Fernholz
