Depressing

Congressional Democrats are apparently singing Hank Paulson's praises. And why not? He's negotiating one of the largest expansions of federal power in decades. The bill is nearly silent on the prices of assets purchased and has minimal provisions for loss recovery. What recovery provisions it has are ridiculously weak (don't have shares authorized to give us warrants, and doubt your shareholders will approve them? Okay, we'll take a note.) But it has dozens of detailed requirements for looking after myriad interests: homeowners, local communities, state and local governments, banks that held GSE preferred, etc.

In the best case, a Democratic Administration will wield these powers. Worst case, Congress can influence Treasury's deployment of them. And Congress gets a historic argument against free markets, and an unbelievable opportunity to hide the excesses of its affordable housing policies.

Hank Paulson got taken. He wasn't intellectually ready for a crisis of this magnitude, and he didn't understand the long-term political motivations of the people across the table from him. He put himself in a position where he had to have the Congressional Democrats, and they've made full use of the opportunity. And there wasn't enough firepower in the Senate or House minorities to stand up and stop this.