Even if the $700 billion Paulson Plan is (let's say was) a good idea, it wouldn't cost taxpayers a dime (a loan, not a bailout), etcetera, I am still appalled at how badly the process has been managed. Let's do a countdown ...
Fumble 4 - Disrespecting Conservatives. The most egregious fumble was ignoring the House Republicans and then expecting them to fall in line. The most conservative, libertarian principles reside in the House minority, making them least likely to support the Paulson plan. So expecting them to roll over for an Administration they have lost faith in, a Speaker they see as abusively tyrannical, and a Senate coalition that arrogantly declared a done deal, was one of the most naive and downright stupid moves I have ever witnessed.
Fumble 3 - Expecting Speed. Paulson and Bernanke pushed for speedy passage of a clean bill. They overreached, given something this complex, and made it dead on arrival by asking for so much power with so little oversight. Ironically, the dominant Democratic talking points has been that President Bush "rushed to judgment" on the Iraq invasion and it is costing $10 billion a month. Hmmm. That seems like a dead line of argument now that Democrats are pushing to pass a compromise. The decision to invade Iraq was glacial by comparison.
Fumble 2 - Losing the Speed Gambit. More to the point, Secretary Paulson and Fed Chairman Bernanke made the "sobering" case that the financial crisis was extremely dire and that an economic meltdown was imminent. Last Thursday, they used their authority to impose a fear message for quick action. We now know it failed. It is one week later, no bailout and no meltdown. The stock market is suffering, but not melting, and there are no bank runs. Nor will there be. But credibility has suffered.
Fumble 1 - Expecting Clean. The idea of a "clean" bill in Washington is hilarious. This was a fumble at the handoff. Why did Paulson think the Democrats (who control both houses in Congress) could resist mucking up the bill with add-ons? No crisis is too serious for politicians to leave unexploited by partisan agendas.
The slow, agonizing drama of all this has given not just partisans but serious scholars time to build up a resistance. The statement signed by over 200 academic economists against the Paulson plan is extraordinarily powerful. The whole push for speedy passage is based on the psychological notion of credible, peerless authority personified by Secretary Paulson and Fed Chairman Bernanke. The scholars statement nukes that authority, symbolically and substantively.
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