1115.org

Hank Paulson (7/22/08):

“Obviously, it will go on beyond months with some of the issues in the housing market, but I believe we can get to the point within months where we turn the corner on housing,” Paulson said in a televised interview with Fox Business Network.

He said the corner would be turned at the point when home prices begin to stabilize and more buyers start to enter the market.

Here we go again. I guess Paulson’s limp attempt at honesty over the weekend was frowned upon by the boss. But here’s the thing: if housing even starts to look like it’s going to turn around in the next few months then many of the loans that look like they will go bad will start performing again because demand and prices would be rising. But all of the banks who have reported earnings in the last week have increased provisions for bad loans and have issued guidance that this is going to continue for a longer period of time than they can see right now, with a consensus guess for a bottom (nullus) in late 2010.

Past that, if a corner is in sight, Fannie Mae and Freddie Mac will not need the bailout that Paulson himself is currently trying to ram through (or around) Congress that is projected to cost taxpayers $25 billion or possibly much more.

Paulson watch has been a much bigger and hallucinogenic job than anticipated, but I think I may have finally arrived at a Grand Unified Theory of Hank Paulson, and it only took 15 months. The Bush administration started out with Paul O’Neill at Treasury. He was a capable man, but had a bad habit of thinking for himself and speaking the truth at inconvenient times, and of course he hung out with Bono so he had to go. In keeping with the great reductio ad absurdum exercise that is the Bush Presidency, they figured out that all they needed was some serious-looking guy who could read a balance sheet and read talking points generated by the political shop. So after everyone else figured out the game and passed, they hired John Snow. Snow tried really hard but just didn’t have the ability to really sell it, and was canned after a few years. In 2006 with the economic house of cards teetering, credibility was at a premium, so the administration lured Paulson away from his hugely lucrative perch at Goldman Sachs to take a government job that pays $183,500 and currently requires the holder to make statements that would flunk him out of a high school home economics class. Odd decision for someone with a then-decent reputation, and $700 million in the bank. If he wanted out of Goldman, he could have just left, purchased a nice-sized island in the Caribbean, and been fine. And as it happens, Paulson was apparently not jumping at the chance to sacrifice his legacy on the Bush altar:

“He should be begging me!”

– An exasperated President Bush to White House Chief of Staff Josh Bolten on having to put on a hard sell to recruit Goldman Sachs CEO Henry Paulson to become Treasury Secretary.

It seems to me the only way to have solved this situation so that Bush would have a credible agent to parrot his talking points without Paulson having to lie himself is the Multiplicity gambit:

Construction worker Doug Kinney finds that the pressures of his working life, combined with his duties to his wife Laura and daughter Jennifer leaves him with little time for himself. However, he is approached by geneticist Dr. Owen Leeds who offers him a rather unusual solution to his problems – cloning.

The only problem is that unlike Kinney who managed to acquire a couple of functional clones before the arrival of stumbling, bumbling #4, Bush and Paulson went straight to #4.

Granted we are lucky that the Paulson clone running the Treasury hasn’t taken to blowing up toilets or shaving his tongue in public, but neither has he displayed any understanding of anything related to economics.