Congress Questions the Bazooka
Some feisty questioning from Sen. Chuck Schumer (D-N.Y.) directed at Treasury Secretary Hank Paulson over the $700 billion sum Paulson is asking Congress for, as the Senate Banking committee hearing wears on.
Schumer's question, in essence: Could you live with less? Could we give you, say, $150 billion now and come back in January and see how you did with what we gave you? It would help the American taxpayer feel a little less bad about this whole deal.
Paulson: "That would be a grave mistake."
Paulson: "It's about market confidence and having the tools to do the job."
Schumer: "The confidence will be determined by how well it works initially, not by how much money you have in your pocket next to your bazooka."*
*Again, this is a reference to Paulson's comment from earlier in the year in which he compared Treasury's bailout firepower to "having a bazooka in your pocket." The bazooka, and Paulson's pocket, has popped up a number of times during this hearing.
At base, though, this is an important issue of perception. Schumer probably thinks the bailout plan will be easier to sell to his constituents by telling them: I'm not going to give Treasury all the money it is asking for. I'm going to give them some of it and see how well they do with it.
Paulson is arguing that the markets will rise and fall as much on confidence as anything else, and fears that if the markets think the government doesn't have enough money on hand to buy all the distressed assets, the crisis will grow worse.
-- Frank Ahrens
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