Hank the Hero?

Hank the Hero?




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In the last few weeks, US Treasury Secretary Henry “Hank” Paulson has been arguably the most prominent person in world financial news.

Appearing in public even more than President Bush, he’s the selective knight in shining armour – swooping to save Bear Stearns, Fanny Mae and Freddie Mac, Merril Lynch and AIG, whilst letting Lehman Brothers fall. His arms outstretched, he threw billions of dollars to the struggling institutions, only to resolutely retract them when faced with the monumental problem of one of the USA’s largest investment banker’s bankruptcy.

 

It’s easy to forget that this square-jawed superhero figure is just an Illinois-raised nature lover rather than the proposed rescuer of the world economy. Now his latest plan to end the credit crisis will set him out as either America’s – and effectively our – saviour or failure.

 

His proposal to use $700 billion (£382 billion) of taxpayer money to buy up all the “toxic” mortgage backed assets and move them to a new state owned government fund has been described as “the biggest act of interventionism in living memory” by Professor Charles Geisst.

 

The plan is by no means moderate, or capitalist for that matter, but bearing the world’s economic burden on his shoulders requires Hank to take radical action.

 

Although this may appear to be a desperate last ditch effort, after the injections of tens of billions of dollars failed to get interbank lending moving last week, this is no knee jerk reaction. Hank and the treasury have been discussing this idea for at least a month, with the 62 year-old spending weekends at the New York Federal Reserve offices of Manhattan to iron out the details.

 

As a public figure, Hank lacks the gloss and spin of a seasoned politician, but his frank and businesslike manner has been refreshing as he spoke about the “humbling” time for the United States – a country that had perhaps forgotten the meaning of humility.

 

Emphasizing the fact that the taxpayer’s money is already at risk anyway, he stated plainly that “there’s much greater risk in not doing this than in doing it.” 

 

Worldwide markets reacted positively to leaks of his bold plan at the beginning of the week in the hope that once the worst is over, these “toxic” assets could be sold and maybe even make a profit for the taxpayer.

 

However, such a drastic scheme has garnered equal amounts of criticism. There have been questions over whether the taxpayers should be shelling out for irresponsible bankers’ mistakes, whilst Ben Stein, one of the country’s most popular financial writers, has called the pitch “catastrophic for the free enterprise system” and called for Hank’s dismissal.

 

Now Congress is hesitating over agreeing to the deal that was originally meant to be pushed through last weekend. Both Democratic and Republican voices are opposing to the dangerously blind move. The many objections are based on everything from principle, to compassion for the taxpayer, economic fears to distrust of Hank effectively controlling the world economy.

 

What Hank ideally needs is for politicians to step aside and let him get on with his big plans to save the world but after the near daily bailouts of last week, his authority has perhaps been undermined.

 

Now all that’s left to see is whether this plan will pan out . . . or whether we’ve built Hank up to the Roosevelt-type hero he can’t be. In his, alleged, words: “If it doesn’t pass, then heaven help us all.”

 

By Louise Fernley

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