Finally, a Bush Administration official has made a confession.
Henry Paulson, the Treasury Secretary, said: “Government has a responsibility to make sure our financial system is regulated effectively. And in this area, we can do a better job.”
The astonishing thing about this statement is that the Bush Administration, for seven long years, has been gutting one regulation after another.
Now it’s a little late to get religion.
But it’s unclear how much of a conversion experience Bush has gone through, or even Paulson, for that matter.
Paulson is proposing an expansion of the Fed’s authority to oversee the financial industry, and that’s good, as far as it goes.
Problem is, it doesn’t go very far.
Paulson isn’t recommending a return to Glass-Steagall, the New Deal law, repealed by Bill Clinton and Robert Rubin, by the way, that established a wall between commercial banks and other financial institutions.
Nor is Paulson demanding that any institution holding mortgages or mortgage securities should have a sizable capital reserve in place.
Nor is Paulson offering anything new to the three million Americans who face foreclosure.
He did not recommend that the Federal Housing Authority offer to buy up some sub-prime mortgages from lenders at reduced prices so that people could stay in their homes, as Barney Frank has recommended.
Nor did he endorse Harry Reid’s proposal to reform the bankruptcy laws so that judges could renegotiate mortgages of the debtors who come into their courtrooms. (The bankruptcy laws allow judges to do this for second homes or investment properties, but not for primary residences. Talk about class bias!)
In fact, after acknowledging the need for more effective regulation, Paulson began to take his words back.
“I’m not suggesting that more regulation is the answer, or even that more effective regulation can prevent the periods of financial market stress that seem to occur every five to ten year,” he said.
And he invited dawdling. His proposals, he said, “should not be decided in the midst of stressful situations and should not be implemented to add greater burden to a market already under strain. These long-term ideas require thoughtful discussion and will not be resolved this month or even this year.”
These comments suggest that Paulson made a false confession, that he is actually not serious about the need for re-regulating the financial industry but rather he remains intent on doing the industry’s bidding, which is the traditional role of the Treasury Secretary and the sine qua non of the Bush-Cheney Administration.