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I Come to You, Cashmere Hat in Hand . . .

By Dana Milbank
Wednesday, September 24, 2008

"I don't like to be in this position, asking for things and, you know, answering to the American taxpayer," Treasury Secretary Hank Paulson informed the Senate banking committee yesterday.

His discomfiture was easily understood.

He left Goldman Sachs two years ago with hundreds of millions in his pocket and an invitation from President Bush to take over the U.S. Treasury. Now, after assuring lawmakers for the past two years that the markets would take care of themselves, he was asking Congress for perhaps $1 trillion in borrowed taxpayer money to bail out his former peers and colleagues on Wall Street. He wanted the money so desperately -- "quickly and cleanly . . . avoid slowing it down . . . immediate implementation . . . urgency . . . immediate need" -- that, if he had any hair, he probably would have set it on fire right there in the Dirksen Senate Office Building.

The senators were none too pleased to receive this panhandler. Though they've collectively accepted more than $33 million from Wall Street and related industries in this election cycle alone, the committee members took turns channeling their inner Huey Longs.

"This massive bailout is not a solution -- it is financial socialism, and it's un-American," fumed Jim Bunning (R-Ky.).

"It does not make any sense; it will reward the banks first, who got us in the financial mess," protested Mike Enzi (R-Wyo.).

The fury of Bob Menendez (D-N.J.) caused his metaphors to collide ("I am not going to be stampeded into rubber-stamping this proposal"), and even the demure Elizabeth Dole (R-N.C.) found the whole thing "infuriating."

Much of this was posturing, of course. Lawmakers, afraid of being blamed for the next Great Depression, have little choice but to give Paulson much of what he wants. But after the Bush administration railroaded them on other emergency measures that later turned out to be problematic -- the Iraq war, the Department of Homeland Security and the USA Patriot Act -- the bipartisan outrage suggests that, this time, Congress will make the administration squirm a bit.

Paulson, a college football star before his ascent on Wall Street, was unaccustomed to squirming, but he did his best. "I share your frustrations; I feel those frustrations," he told the senators. "Again, I'm frustrated the taxpayer is on the hook," he added moments later. He went on to remind them that "some of the frustrations here I share, you know," that "I did not want to find myself in the position of being here asking for these authorities," and that, truth be told, "I hate to be on this side of the table, because this is not something that I ever wanted to ask for." Indeed, said the author of the greatest market intervention in nearly a century, "I've never been a proponent of intervention."

But Paulson's conversion was okay, because the committee members were undertaking their own conversion, to Main Street populism.

"This legislation must be passed to help Main Street, not because the federal government is being held hostage by Wall Street," Enzi posited.

"We've tried to avoid propping up failed businesses on Main Street; we should not prop up failure, malfeasance and avarice on Wall Street," submitted Wayne Allard (R-Colo.).

"The bottom line to me is: How do we make sure that the connection between Main Street and Wall Street is understood?" said Mike Crapo (R-Idaho).

Answered Chuck Schumer (D-N.Y.): "While Wall Street caused the problems we face, unfortunately, if we do nothing, Main Street will also pay a severe price."

"I hope we can give Main Street a good bit more help and attention than we have to date," contributed Sherrod Brown (D-Ohio).

Paulson tried his hand at the Main Street game. "Even some Main Street non-financial institutions -- or, excuse me, some non-financial companies -- have trouble financing their normal business operations," he argued.

But mostly, the secretary stuck to his main point: that if Congress doesn't give him what he wants, and soon, the year will quickly become 1932. "There is a bipartisan consensus for an urgent legislative solution," he coaxed. "We need to build upon this spirit and enact this bill -- enact this bill quickly and cleanly and avoid slowing it down."

This was quite a turnabout for Paulson, who earlier this year had promised that "the markets are going to work." Despite what he modestly termed a "housing correction," he assured lawmakers: "I have confidence in our markets."

Given that track record, lawmakers weren't inclined to be bullied by Paulson's demands for haste. "Speed is important, but I'm far more interested in whether or not we get this right," said Chairman Chris Dodd (D-Conn.).

"I'm very concerned that the express need to pass something now may prevent us from devising a plan that would actually work," agreed Richard Shelby (Ala.), the committee's top Republican.

And Schumer was moved to invoke Greek mythology, using the imagery of sea monsters to analyze the situation. "As we look forward in the week ahead, we face both a Scylla and a Charybdis, dangers on both sides," the oracle of New York said. In Schumer's telling, the Scylla monster represented the danger of not acting. "But there is also the Charybdis, the other danger of acting so quickly that we choose a bad solution," he said.

The noted classicist had planned to ask a follow-up question later, but an appearance on CNBC kept him from returning to the hearing room in time.

"We really do have to go," Paulson advised the committee.

On Wall Street, the stock market resumed its plunge.

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