That is effectively what Mr. Paulson was quoted as saying in an NYT article today. He was asked about the generous terms for his bailout, which will give the nation's nine largest banks close to $80 billion in subsidies over the next five years. Paulson rejected the idea that he could have demanded market terms for the government's investments in the banks: "I could not see the United States doing things like putting in capital on a punitive basis that hurts investors." It would have been appropriate to highlight this comment and perhaps even devote a separate article to it. Secretary Paulson has repeatedly condemned protectionism and warned how it can hurt the economy. There is no economic theory that shows that the economic distortions created by subsidies for major U.S. banks are any less harmful than subsidies for any other industry.
--Dean Baker
