Oct 14, 2008 @ 03:14 pm
NEW YORK - Three weeks ago, Treasury Secretary Henry Paulson called the notion that the government would buy stakes in banks to save them a "failure."
What a difference 21 days and $2.4 trillion dollars in lost value from pension funds, college funds and 401(k)s makes.
For more than a year, U.S. officials haven't been able to get this financial mess under control, and their constant fumbling has wrecked the public's confidence.
The government's plan to take partial ownership of banks is just the latest round of flip-flopping on the part of the Bush administration. Let's hope they have it right this time.
Compare this: "Some said we should just stick capital in the banks, take preferred stock in the banks," Paulson told the Senate Banking Committee on Sept. 23. "Putting capital in institutions is about failure. This is about success."
With this: "Today's actions are not what we ever wanted to do--but today's actions are what we must do to restore confidence in our financial system," Paulson said Tuesday when he announced the new plan.
This crisis began with the housing market collapse, but has ballooned into something bigger and more complicated than anyone, even Paulson, ever thought it would be.
"We are acting with unprecedented speed taking unprecedented measures that we never thought would be necessary," Paulson said with Federal Reserve Chairman Ben Bernanke and Federal Deposit Insurance Corp. Chairman Sheila Bair at his side.
But the Bush administration's massive missteps have only compounded the current woes. First, officials said the mess would be "contained." Then it took them months to acknowledge its severity. And once they decided to fight it, they've struggled to find the right medicine.
"In the 'fog of war,' it is often hard to see the best way to move forward," said Ed Yardeni, who runs an investment firm bearing his name. "Policy mistakes, which worsen the conflict, are always made."
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