Newt Gingrich called for two controversial things to happen, and I happen to agree with the Speaker on both of them.
- He said the President would be better served by having Deputy Treasury Secretary Kimmitt takeover as Treasury Secretary and to fire (or accept the resignation) of Hank Paulson. I completely agree. I have been a staunch supporter of Paulson since he was nominated, and felt he was a vast improvement over Snow and light years better than the fool/backstabber Paul O’Neill. Paulson understand the markets, and I believe him when he said two weekends ago that he “hates that he has to propose this bill”. That said, being Secretary of the Treasury is not like being the CEO of Goldman Sachs, and convincing the American people to go along with what is a very controversial bill in a matter of two weeks is not like taking a company public and trying to convince the Street that it is a hot IPO.
The sad truth is Paulson has not only lost credibility in the way he sold this bill to the Congress and the public, but now he has become a liability for the White House in their attempt to revive this effort.
Kind of how when a salesman can’t close the deal, the firm puts another face in front of the client in the hopes of changing the perception of the deal.
The power that Paulson sought was virtually unheard of in American history. The money he would have been responsible for “investing” in these risky mortgage backed securities – money that would have had to have been raised by issuing a record amount of Treasury bonds to finance such a venture – was absolutely staggering.
The fact that Paulson had his then Under-Secretary Robert Steel (now Wachovia CEO, at least until this morning) work up this bailout plan back in January and February, and then waited until a month before this Presidential election to essentially put a gun to the head of already nervous Congressmen with a “Do Or Die” edict only made me question Paulson’s motives even more.
Newt is right. The President would be best served by Kimmitt taking over at Treasury and Paulson going back to the private sector.
- SEC Chairman Christopher Cox should come out tomorrow morning and immediately suspend the “mark-to-market” accounting regulations of the Sarbanes-Oxley laws. At least for mortgage backed securities and other Level 3 assets. I have been advocating this for many months now. This arcane regulation has completely distorted the duration gap of capital by requiring long-term assets that are meant to be held to maturity, not traded quarter to quarter, to be accounted for like short-term investments. If pension funds, the Federal Government, or the Social Security Trust Fund used these accounting standards, our entire country would be rendered insolvent and all retirements would be wiped out. It is silly. It doesn’t require the fools in Congress to repeal it. It can be suspended by order of the SEC Chairman tomorrow, and it should be. That would at least allow banks to reflect capital balances on their books that are more consistent with reality and stem some of the panic.