Selling the Plan
David Colker and Tom Hamburger have a great reported piece in the Los Angeles Times looking at how Bush, Paulson, and Bernanke screwed up the initial pitch for a rescue plan:
Leaders of some of Washington’s most powerful political interest groups — including business, labor and civil rights organizations — said that instead of starting out by organizing a broad-based coalition to build bipartisan support and mounting a grass-roots campaign to explain the crisis to Main Street, administration and congressional leaders focused on reassuring Wall Street. [...]
AFL-CIO President John Sweeney, for example, was never consulted by the administration, according to labor union officials. Sweeney knows Secretary Paulson and has been called by him in the past. [...]
“That would have been important,” said the lobbyist, who asked not to be identified because making such comments publicly could be bad for business. “Among other things it would provide a great photo op: Bush could have stood there with labor leaders, workers from leading corporations, members of the Black Chamber of Commerce, the Hispanic Chamber of Commerce.”
Last time I posted on this some folks replied that, well, things had reached such a point after the Lehman breakdown that Paulson had to just throw his proposal down on the table. But that seems wrong to me. The markets needed reassuring, but Paulson could have simply announced that he’d decided that a comprehensive solution was needed and that he was calling congressional leaders to spend the weekend meeting with him and Bernanke to discuss a solution. Then other administration folks could have, as the article suggests, called business and labor leaders to explain the situation to them and had them and state and local officials talk to the public about the nature of the problem.
Instead, well, we got what we got — a poorly designed initial plan that was unacceptable to congressional leaders from both parties, silence from non-governmental actors, and a rising public backlash against a mysterious and seemingly under-motivated plan.
36 Responses to “Selling the Plan”
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October 1st, 2008 at 1:50 pm
How’s the plan in the Senate look? Better or worse?
Will the House accept it?
October 1st, 2008 at 2:07 pm
FROM:
http://www.telegraph.co.uk/finance/comment/jeffrandall/3112269/Why-propping-up-banks-will-not-rescue-a-debauched-financial-system.html
Why propping up banks will not rescue a debauched financial system
Key excerpts:
Confession time. As 228 Representatives in Congress voted against Hank Paulson’s bail-out plan on Monday, I was cheering them on.
Yes, the West’s financial infrastructure is in severe distress. Yes, more banks are going to crumble. Yes, there will be a recession. But allocating $700bn (it would almost certainly turn out to be more) to a clean-up programme for toxic assets, in effect socialising the poison of private greed, has no merit other than to delay the inevitable. No amount of federal cash can rewind the X-rated horror video.
:There is a conspiracy of bankers and politicians whose self-interest is masquerading as sophisticated policy. They want us to believe that they have the keys to salvation. I have not seen a scrap of evidence to confirm this.:
October 1st, 2008 at 2:18 pm
Bush is mentally back on the ranch already, and the people working for him are probably spending a lot of their time job-hunting. That’s what went wrong.
October 1st, 2008 at 2:50 pm
“Bush, Paulson, and Bernanke screwed up the initial pitch for a rescue plan:”
Not really. Their plan was less about the plan itself. They were after hysteria. They got it too. They needed to create a sense of crisis and they did just that. Their plan ensured that something would get done. Whatever that something is, it will most certainly include billions in taxpayer dollars on one end and Wall Street bankers on the other.
October 1st, 2008 at 2:52 pm
I agree with rmwarnick. Shrubby is just counting the days he can kick back with a bottle of Jack. Paulsen has more at stake, he needs to shore up the value of his decimated Goldman Sachs holdings, but couldn’t get drag the head salesman, the President away from Dancing with non-Stars or the Jerry Springer show.
October 1st, 2008 at 3:06 pm
Put me down with rmwarnick and cparis. A leftie conspiracy theorist friend of mine was trying to convince me that Bush was getting ready to declare a state of emergency, cancel the election and declare himself dictator for life. I couldn’t think of anything less likely. Bush has been checked out for a long time.
October 1st, 2008 at 3:20 pm
I think the issue was that Paulson was thinking like a businessman, rather than a politician: rather than trying to build consensus before proposing something, he proposed his ideal plan to Congress and waited for them to counter. From an institutional perspective, he wanted as few constraints as possible on Treasury’s authority to deploy the money, so he didn’t write any oversight into the bill; he probably figured that since Congress would clearly want oversight, he should just let them come back with the mechanism that they wanted.
This is good strategy in a business negotiation, but pretty lousy politics, as we’ve seen.
October 1st, 2008 at 3:31 pm
Then other administration folks could have, as the article suggests, called business and labor leaders to explain the situation to them and had them and state and local officials talk to the public about the nature of the problem..
I love the sentiment being expressed here that if only the Wise Old Men had patiently explained everything to us ignorant townies, we’d all have gladly supported the terrible Paulson bailout strategy. But I don’t love it as much as I love the fact that people like Matt Yglesias have never bothered themselves to indicate what they consider the consequences of not passing a bill to be, nor have we ever seen anything remotely resembling an explanation as to how the awful bill in question would prevent those consequences from occurring.
October 1st, 2008 at 3:38 pm
@6: Daily Show exchange from early last week:
John Oliver: Bush will clearly not go down as the best President in American history, but there is still a chance that he could be…
John Stewert: The worst?
John Oliver: …the last.
It seems clear that for some combination of hubris (Paulson) and lack of attention (Bush) the initial offer was laughably bad. BUT: there still seems to have been a political miscalculation by congressional Democrats in not distinguishing their own plan clearly enough. A more liberal plan might not have generated the public opposition this one did–especially if the president had placed his negative political capital against such a plan, instead of for it. Who knows if there’s still time?
October 1st, 2008 at 3:39 pm
I don’t know whether the Bush administration wanted a panic or not.
On the one hand I don’t see why they ought to want one.
On the other hand I look at what they actually did. They announced that there was a giant crisis that demanded giant action in just a few days. Could they have done better at starting a panic?
Well yes, they could. They could announce “The economy is strong. Yes, there are difficulties but they can be overcome. Nobody panic. It’s vitally necessary that nobody panic. Your bank accounts are safe. Don’t withdraw your money, it is not necessary. I repeat, the economy is strong. Don’t panic.”
October 1st, 2008 at 3:55 pm
Republicans love to blame middle and low-income America for the current economic-housing crisis. They don’t talk about Lenders who suckered unsuspecting buyers into buying homes through what is called a “teaser rate” and then a year later raise the mortgage rate to an amount the buyer can no longer afford. So they have to foreclose which allows the Lender to re-sale all over again with the same “teaser” gimmick to another vicitim!
We need strict regulation and oversight in this country. One example is the “uptick rule”, a safeguard, which is one of the FDR Era regulations which the Heritage Foundations meant when they said that they wanted to roll this country back to the days of Herbert Hoover. They succeeded. The Bush administration got rid of this safeguard last year—with predictable results. The Safeguard they did away with was meant to keep “insiders” from driving down the prices of their own company’s stock so that they could sell short at will to make a quick million whenever they felt like it. Let’s be clear, the Banks and companies that are Regulated are not experiencing the current economic crisis as those institutions which are not regulated and are de-regulated and have no oversight! The uptick rule is fairly simple. ”
(And by the way, Sec. Paulson has a nickname only the “insiders” call him — Hanky Panky Paulson! I wonder why?)
http://www.investopedia.com/terms/u/uptick…
October 1st, 2008 at 4:24 pm
Tom Hamburger? That is the best name I have ever heard.
October 1st, 2008 at 6:09 pm
It wasn’t so much the pitch as the over-reach in the 3-pager, particularly the “no-review” provisions.
It was completely characteristic of Bush and the unitary executive schtick. At a time when they needed to build trust, they went for their greatest hits from earlier in the decade, and no one wants to hear those songs anymore.
October 1st, 2008 at 7:51 pm
TPO speaks for me, except TPO seems to accept MY’s premise that the outcome represents some kind of failure.
Paulson was trying to stampede Congress into giving him $700 million to do with as he pleases. He doesn’t get it, so instead he accepts a few compromises and restrictions, and gets a huge amount of money to spend pretty much as he pleases after a delay of only a week.
It seems highly unlikely to me that he would have done better by crafting a proposal that union leaders would have signed on to.
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