The debate over Henry Paulson's tenure as treasury secretary heats up with a two-part profile in The Washington Post by David Cho that -- to be kind -- offers the Treasury view of him as both a great man and as a sort of action hero. Reading the two pieces, pondering the beautiful photographs, one comes away with the confirming sense that not only was the White House comatose for most of the crisis, but that other parts of the government seem like bit players as well; even the Fed's Ben Benanke and Tim Geithner make only token appearances in these stories. Instead it's Paulson taking control, making the hard decisions on everything from the Lehman Brothers Holdings Inc. failure to forcefully urging the Securities and Exchange Commission to temporary limit shorting -- a step Paulson admits was akin to "book burning," though neither Cho or Paulson ever return to the question of whether it was worth it.
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Paulson clearly deserves some credit. The president increasingly resembles Rip Van Winkle. Paulson often did seem to be Bush's "war general" -- a Bushian phrase which sums up much of what was wrong about this administration. Paulson has clearly been tireless. He has embraced responsibility. And he has made some very difficult decisions and then was willing to admit when he was wrong and change direction.
Cho, however, doesn't offer the other side of this portrait. How much of Paulson's "leadership" represented bullying: his way or the highway? Economic management, after all, is not necessarily like running Goldman, Sachs & Co. What was the role of institutions like the Fed? (A recent Wall Street Journal story presents a much different view of Fed-Treasury interaction.) Why wasn't Treasury better prepared when Lehman went down, six months after the Bear Stearns Cos. run? Why didn't Paulson understand the political mood, particularly the idea that taxpayer money was being used to save Wall Street fat cats? Why didn't he work harder, sooner on some sort of foreclosure remedy? The bailout itself was one political misstep after another, salvaged by Paulson's commendable refusal to give in and by the darkening economic climate. And then there is one stumble after another as he tried to revise the plan and limit its use.
And there's one big problem that directly reflects how we judge Paulson's tenure and Cho's portrait: Is the Paulson plan (revised) working? This week, Paulson's stock is down. If we get a little good news, it'll rise.
Cho lauds Paulson for his autonomy from a destructive White House -- a characterization that Paulson seems to agree with. But the real story here may be how difficult to impossible it is to run Treasury, in a crisis or in good times, without close alignment with the political power and bully pulpit of the presidency. Paulson may have convinced Cho, but he's been unable to persuade many others as to the ultimate wisdom of his decisions, or his revised decisions, or his management style. The situation still stinks, and the way out is still unclear.
All this makes a convincing case that a crisis like ours is less about economics and more about politics. Paulson probably wouldn't agree. - Robert Teitelman
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Robert Teitelman is the editor in chief of The Deal.
