One More Try

November 17, 2008

I just might be starting to buy into all of this depression talk.

Not Depression, of course—with apologies to George Soros and John Whitehead, that's still ludicrous—just plain depression. It's hard enough when your job has you knee-deep in the muck every day, and when the Dow has a "7" handle, and when your friends want to talk markets first, sports second. But then piled on top is that, after having convinced enough people that his original idea was a good one (the only one?), the guy steering the bailout ship, and one of the few public faces of crisis-solution in which some of us had any faith, essentially says it's time to start over.

My first reaction to Paulson's reversal was actually one of admiration; I wanted to give him some props for being flexible, for moving with the markets. And he is in a tough spot, after all.

But six seconds later it hit me, remembering just how hard he sold TARP (perhaps better dubbed now the Capital Restoration Asset Program; at least it's a more appropriate acronym). I know I liked TARP at the time, if for no other reason than Nancy Pelosi didn't, and because I couldn't come up with anything better myself.

It seems that the very assets Treasury had its eyes on for rescue are now basically accepted to be worthless. At the same time, a shift to get more non-bank names involved, those without heretofore dreaded counterparty risk, seems to be underway. These are two developments that fly in the face of the urgent, almost panicked request to get TARP going in the first place.

Remember, the scheme to buy up the toxic debt from Street banks wasn't billed as a small part of the plan ... it WAS the plan, and Paulson told us we needed it. Now! Upon reflection, I'm left wondering if the Treasury Secretary 1) knows what he's doing, or, worse, 2) felt enough heat from the pols about giving money to greedy banks that he was compelled to cave into their desire to share it with consumers, who also happen to be known as voters.

 For that he would surely deserve our scorn.

Thomas Granahan 
thomas.granahan@sourcemedia.com