Treasury Secretary Henry Paulson is telling Congress that if it doesn't give him a $700 billion blank check the financial system is going to collapse. It would be reasonable for reporters discussing this request to present some background on the track record of the person asking for this enormous blank check. In March of 2007, after the first shock waves of the housing meltdown had already hit, the Associated Press reported Mr. Paulson's view that the credit difficulties linked to the housing slump would be limited. In August of last year, after the second round of financial shock waves disrupted markets worldwide, Paulson commented, "We have the strongest global economy I’ve seen in my business lifetime." Just last March he warmly endorsed a reduction in the capital requirements for Fannie Mae and Freddie Mac, saying "additional capital [invested in mortgages by Fannie and Freddie] will enable the companies to help more homeowners and will strengthen the underlying fundamentals of the mortgage market." At every point along the way, Secretary Paulson has failed to see the extent of the crisis resulting from the collapse of the housing bubble. This raises serious questions about his judgment. Reporters should be discussing Paulson't track record in the context of this bailout proposal.
--Dean Baker [The NYT is on the job -- I missed the excellent chronology in the sidebar.]
