Last year, after seeing former Treasury Secretary Hank Paulson trying to defend the TARP bailout he designed, I wrote that he should go away in shame.
After all, even former Fed Chairman Paul Volcker recognized there was a much better, non-corrupt, way of recapitalizing the financial sector – what is known as FDIC resolution.
I’m now even more disappointed that the former Vice President, Dick Cheney, defended the TARP bailout in his memoirs.
Former Vice President Dick Cheney anticipated the conservative uproar over the 2008 Wall Street rescue package, and he writes in his new memoir that the Bush administration “briefly” considered not seeking congressional authorization for the $700 billion bank bailout. …The former vice president writes that he signed on immediately to the plan devised by Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, despite his reservations about the intense government intervention into the financial sector. “There was no other option,” Cheney writes in the memoir, In My Time.
But Cheney is completely wrong. There was another option. The FDIC-resolution approach, which was basically how the government handled the S&L crisis about 20 years ago, was the right policy.
And I must have talked to about 10 people in the Bush Administration in September 2008, trying to get them to go with that approach.
I was told that wasn’t possible since congressional approval would have been needed to increase the FDIC’s financial resources. Knowing that the White House was going to ask for something (and fearing they would do something really bad), I responded that they should seek that authority.
As was usual during the Bush years, my fears were justified. My advice was ignored and the Administration chose the corrupt and damaging approach – an approach the Obama Administration has happily continued.
