Las Vegas Sun

February 12, 2012

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SUN EDITORIAL:

Paulson’s bailout blues

Acting on his own instincts, Treasury secretary not succeeding in reviving the economy

Sunday, Nov. 16, 2008 | 2:06 a.m.

President George W. Bush has been largely silent on the $700 billion bailout bill that he signed Oct. 3.

He has given Treasury Secretary Henry Paulson all the power over the money, even though the frightening economic forecast calls for leadership from the White House.

Taking advantage of some flexibility built into the bailout bill, Paulson is moving fast on a route that does not appear on any planned road map for avoiding a recession.

On Wednesday he announced the official end to the original route, which had the government going from bank to bank buying much of their “troubled” assets, a word that quickly morphed into “toxic.”

As is known, though, Paulson early on had unofficially abandoned that route. He instead went from bank to bank, investing hugely in their operations on the assumption they would start lending again, firing up the economy.

Instead banks began using most of their bailout money to buy weaker banks, pay dividends to investors and shore up executive salaries and bonuses. The economy has not responded to this government investment in private banks. In fact, it is getting worse.

Paulson has also abandoned other aspects of the original plan, such as tracking how the money was being spent and publicly posting this specific information on the Internet.

Fortunately, Congress released only half of the bailout money, which is nearing depletion. Congress should now ask Paulson why his expenditures have not improved the economy.

If it does not get good answers, Congress should consider releasing only small amounts of money at a time from the other half. And then only if the money’s destination is well explained and meets with approval.

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