"I have always been trained to run towards problems," Hank Paulson told members of Congress as he squirmed his way through hearings on his $700bn Wall Street bailout plan this week. It is a line he has used often, first as he clawed his way to the top of the investment bank Goldman Sachs, and repeatedly in his gruelling two-and-a-half years as US Treasury secretary. But his political capital has evaporated. His reputation for competence was dented by the collapse of Lehman Brothers, when he had said no to a government bailout, only to say yes to a much bigger nationalisation, of the insurance giant AIG.
While politicians rallied to his call to craft a bipartisan once-and-for-all solution to the credit crisis, he fundamentally overestimated his personal political capital and under-estimated the depths of congressional fury when he asked for extraordinary power to spend an equally extraordinary amount of taxpayers' money to buy the mortgage assets that have poisoned the banking system.
Just three pages long, the draft legislation published on Saturday in effect turned the federal government into the world's biggest hedge fund.
The calculation he made was that Congress would be willing to give him the same sort of powers as a chief executive at, say, Goldman Sachs. As they told him again and again in those hearings, that is not the way taxpayers' money should be handled. It was a misjudgement he has been made to regret.Reuse content