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Was the Congressional Grant of ‘Bailout’ Authority to Treasury Secretary Henry Paulson Really So “Unprecedented?”: A Historical Analysis and Comparison of Treasury Secretary Authority During Financial Crisis | Author: Zachary Cormier

Was the Congressional Grant of ‘Bailout’ Authority to Treasury Secretary Henry Paulson Really So “Unprecedented?”: A Historical Analysis and Comparison of Treasury Secretary Authority During Financial Crisis | Author: Zachary Cormier

The time had come for Treasury Secretary Henry Paulson to urge Congress to give him more power, a lot more power. It was the middle of September 2008, the United States’ financial thermometer was about to pop as the spark that was the United States housing and mortgage crisis had grown into a raging financial wild fire. The housing bubble burst of 2006 had kindled a ‘mortgage default crisis’ that proceeded to bankrupt homeowners and lenders nationwide. The ‘crisis’ grew and grew, spreading uncontrollably, until at last the investment ties to the ‘Main Street’ mortgage lenders caught ablaze and nothing could stop the crisis from roaring into Wall Street. Financial giants burned, markets boiled over. Investors threw their panic like gasoline onto the towering flames, unloading securities in fear of a free fall. The Treasury Department did what it could to contain the insatiable inferno, but still it continued to rage, with no signs of relenting.

The immense heat of the mounting crisis bore down perhaps most sharply on Paulson and the rest of those that worked, and indeed lived, in the Treasury building (which at this point remained open around the clock, every day, with only a tuna-fish and peanut-butter sandwich buffet to sustain those that tried to save the economy). It had become apparent to Paulson by this time that despite his best efforts, the financial crisis was on the verge of completely exploding. On September 20, 2008, Paulson proposed the Troubled Asset Relief Program to Congress, a $700 billion capped bailout plan that created “a taxpayer-backed entity that would acquire mortgage-backed bonds from banks” at Paulson’s discretion.

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