1115.org

During John Snow’s tenure as Secretary of the Treasury, he proved a renewable source of material for us. In an administration where all policy is politics, and all decisions are made in the West Wing, Snow’s only job was to sell the President’s agenda to Wall Street and foreign investors.

When President Bush announced Hank Paulson’s nomination to replace Snow, he said

He’s earned a reputation for candor and integrity.

The media fell directly in line:

While Paulson has managed to keep his feet out of his mouth, a nice change from his predecessors, he hasn’t really done anything but continue futile Bush administration efforts to jaw-bone China into un-pegging their currency from the dollar. He’s made no progress, and he won’t, but he seems to love running to the business press to talk about all the talking he’s doing. His ineffectual tenure notwithstanding, he somehow has been able to keep his media-bestowed credibility intact.

If there was any justice, the end of this interview with Marketwatch would cause Paulson to be exposed to the effects of the economy he’s so eager to tout:

In a question-and-answer session, Paulson delivered an upbeat assessment of the economy, saying growth was healthy and the housing market was nearing a turnaround.

“All the signs I look at” show “the housing market is at or near the bottom,” Paulson said. The U.S. economy is “very healthy” and “robust,” he said

Where to even start?

U.S. GDP growth is slowing, and economists have been regularly revising their predictions down:

The Blue Chip Economic Indicators panel of forecasters said they expect U.S. gross domestic product to expand at a rate of 2.3 percent in 2007, the slowest growth since 2002.

But let’s be charitable and give Paulson the benefit of the doubt on whether growth slowing to (or more likely below) the rate of inflation is “very healthy” and/or “robust.” Economists get things wrong all the time, and there’s still the possibility, at least in a vacuum, that the economy will be just fine. And apparently it has become customary for the Treasury Secretary and other high-ranking officials to talk up the economy regardless of facts. Sort of a “Heckuva job, Brownie” or “Buttercheeks has our full confidence” for the dismal set.

But there is simply no excuse for Paulson’s General Fluffer moment on housing. I’m not sure what signs Paulson is relying upon, but unless a) his assistant is filtering out all the reality-based reports, b) his definition of “all” is significantly different from mine, or both, he is 100% wrong about the state of the U.S. housing market.

All of this data comes from links I’ve been saving over the past few weeks. Is it possible that Paulson is following his boss’ lead and ignoring the papers? Maybe, but when Congress is already considering an absurd exercise in moral hazard via a multi-billion dollar bailout, his legislative aides should at least have mentioned it to him.

A Bush administration official, even a high-ranking cabinet member, telling lies isn’t even an automatic post here anymore; there simply aren’t enough hours in the day. But when the guy they brought in to be a credible voice starts talking out of his ass in the face of overwhelming evidence, it’s a serious problem. Considering that it was a comment from then-Federal Reserve chairman Alan Greenspan that created a boom in the “non-traditional” mortgage markets, Paulson should be erring on the side of caution.

More on the housing mess, and our leaders’ role in it, in an upcoming post.

**Late add-on: The National Association of Home Builders doesn’t see a housing bottom either, and surprise, surprise, they see recession risks rising:

Growth Domestic Product growth still is in a slowdown phase and recession risks have risen to some degree. The labor market still is performing well but some weakening is likely later in the year.

A record volume of vacant (unoccupied) housing units is weighing heavily on both single-family and multifamily housing markets, and historical norms suggest an excess of about 1.3 million vacant units on the market.

Deterioration of the supply-demand balance in housing markets has downside implications for house prices and has prompted downward revisions to NAHB’s forecasts of home sales and housing production for the balance of 2007-2008.

**Update 10:30am PDT: Wonder if Hank would like to reconsider his assessments:

Sales of existing homes plunged in March by the largest amount in nearly two decades, reflecting bad weather and increasing problems in the subprime mortgage market, a real estate trade group reported today.

The National Association of Realtors reported that sales of existing homes fell by 8.4 percent in March, compared with February. It was the biggest one-month decline since a 12.6 percent drop in January 1989, another period of recession conditions in housing. The drop left sales in March at a seasonally adjusted annual rate of 6.12 million units, the slowest pace since June 2003.