Sunday, September 21, 2008

Don't Think Just Sign

Another Patriot Act - hurry before the anthrax is everywhere! - another desperate preventative invasion before the mushroom cloud, the dirty bomb, the flocks of diseased birds, another midnight ultimatum to the Louisiana governor; everything in panic, surprised, breathless, desperate, at gunpoint - just the flagrant conman's game, it's really astounding. How many times can you run the same con?

STEPHANOPOULOS: Let’s talk about some of the details.

The original legislation we saw said that you would be buying up the mortgage-related assets from financial institutions having headquarters in the United States. Yet last night, the fact sheet put out by the Treasury seemed to expand that. It said only that the financial institutions have to have significant operations in the U.S., and that you could waive that at your discretion.

So, will foreign financial institutions be eligible to have their assets bought?

PAULSON: Yes, and they should, because, as you think about this, if a financial institution has business operations in the United States, hires people in the United States, if they are clogged with illiquid assets, they have the same impact on the American people as any other institution.

That’s a distinction without a difference to the American people. The key here is about protecting the system.

Now, I need to say to you that we have a global financial system. And we are talking very aggressively with other countries around the world and encouraging them to do similar, and I believe a number of them will.

But, remember, this is about protecting the American people and protecting the taxpayers. And the American people don’t care who owns the financial institution. If the financial institution in this country has problems, it’ll have the same impact...


PAULSON: ... whether it’s U.S. or foreign owned (ph).

STEPHANOPOULOS: But they might wonder what they’re getting from the firms in return.

So, let’s say you go into a financial institution and buy up their bad assets. What do the financial institutions have to do?

Some Democrats in Congress have said, for example, that they should have to accept limits on their executive compensation. Are you open to that?

PAULSON: Well, let me describe it this way. In instances where institutions fail, and the Federal Reserve or the government comes in...

STEPHANOPOULOS: But these haven’t failed yet.

PAULSON: No, that’s what I’m saying. In instances where they do fail and you come in, obviously, there are limits. That’s what we saw with the GSEs. That’s what we saw with AIG, OK. Now, what we’re doing here is, we’re trying to do something well in advance of failure. We’re trying to offer a program across the whole financial landscape to buy the assets that are clogging up the system, so that the markets can work.

And I believe, to have this program work, we don’t want to make it punitive and make it difficult for...

STEPHANOPOULOS: And let me just play devil’s advocate here. But then, if you’re a taxpayer watching it, and you say, OK, these financial executives are going to be freed up to go make millions more -- and the taxpayers are taking the risk.

PAULSON: George, I totally agree with the frustration there. Because, remember, what we’re doing right now is, first, stabilizing the market.

That is only part of it. Once we stabilize the market, we need to ask ourselves: How did we get here, and what do we do about it so we don’t get here again?

I’ve spent a lot of time, well before this problem, developing a regulatory blueprint, looking at our outdated, outmoded regulatory system that doesn’t fit the modern financial world, looking at how policies and practices need to be changed.

We need a lot of reforms. And this is going to be something Congress and the next administration is going to be working on for a long time.

But these can’t be done, and shouldn’t be done, in a matter of days. And we need this program in days in order to protect the American people.

STEPHANOPOULOS: Many in Congress also say that there should be protections for homeowners facing foreclosure in this bill, for example, giving bankruptcy judges the power to adjust the terms of loans.

Are you open to including that?

PAULSON: George, we’ve been focused on homeowners for a long time, working to avoid foreclosure, working with servicers, industry participants. And it sure seems to me that, as we buy these mortgage- backed assets, we will have much more leverage in working on the kinds of programs we need to work on.

But the key question here is, we want to help those homeowners that want to stay in their home and have the financial capability to stay in their home.

And the vast majority of foreclosures in this country -- as regrettable as they are, and as painful as they are -- are coming from people who either don’t want to stay in their home and live up to their obligations, or those that never had the financial capability to stay in their home, took out loans they couldn’t afford as the result of irresponsible lending practices.

STEPHANOPOULOS: So, it sounds like you’re saying you don’t want any new protections in this bill. You want this plan just to be passed as is -- no stimulus plan, no foreclosure protections, no restrictions...

PAULSON: Well...

STEPHANOPOULOS: ... on compensation for executives?

PAULSON: What I’m saying is, we need this to be clean and quick, and we need to get it in place.

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