President Paulson, Vice President Bernanke

It is kind of amazing that all of these massive government bailouts have occurred with virtually no input from any elected leader. The Fed and the Treasury Department are really driving the boat. Bush made a statement in the Rose Garden this morning which said, approximately, that's he's aware of the problem and somewhat concerned about it. Some would say he's pulling a Katrina; clearly he's not involved in this at all.

According to The Wall Street Journal, Bush was briefed on the rescue after it was in play. And even then, he was only "briefed." There's been no effort on the part of the White House to even advance the idea that Bush is an engaged participant who's actively signing off on these actions, possibly because suggesting his involvement in a crisis of this complexity would cause the stock market to run and hide in a corner.

Congress, too, has been cut totally out of the loop. The AIG bailout -- in fact, all of the bailouts -- have been conceived entirely without their involvement. Indeed, the Federal Reserve and the Treasury Department have been acting, over the course of this crisis, as if they are the sum total of the government. And that may be the correct approach: Neither the president nor the legislative branch possess the expertise or speed to be involved in the real-time crisis management that Bernanke and Paulson are trying to manage. They could, presumably, reverse decisions after the fact or change the contours of the law, but for now, the ship is being steered by the Chairman of the Federal Reserve, the Treasury Secretary, and an informal working group of Wall Street CEOs and banking powerhouses. And the government, as we normally think of it, has basically accepted their temporary authority. You've heard of martial law? We're currently in a state of market law.

I think Paulson and Bernanke clearly have enough information to know what they're doing, but of course they have a different loyalty than an elected official. Clearly their goal is to save the financial markets. Elected officials would presumably look at how this impacted constituents. There's a significant amount of overlap there, but it's not a monolith. If the Fed is running the show, you will get Fed-friendly policies.

Lawmakers are fairly teed off that they've been pushed out of the loop here, and Nancy Pelosi is seeking to put them back in charge. I think it's fair that a $85 billion dollar bailout of the world's largest insurer comes with some Congressional, and therefore popular, input. Interestingly, the Republicans in the House are the ones talking populist.

"My instincts and my gut tell me they made the wrong move. But I don't have all the information they do," said Rep. Paul D. Ryan (R-Wis.), the senior Republican on the House Budget Committee, who yesterday fielded furious calls from constituents. "People are angry because they see this as their tax dollars bailing out Wall Street speculators. And in some cases, it is." [...]

"Just how long can the poor beleaguered taxpayer be expected to bear all the losses and bear all the risk?" said Rep. Jeb Hensarling (R-Tex.), one of the protest's organizers. "Lehman Brothers must have the worst lobbyist in town, since they are the only ones that appear to have lost out on the bailout mania."

This seems like a cover, something easy to say after the fact without taking responsibility for the environment they helped create. Indeed, the standard-bearer of the party is trying to show his conversion to a corruption fighter and a regulator who will stop the greed on Wall Street, bail out the auto industry and unleash the innovation of the American economy. But it's a fantasy world.



That's brutal. So is Harry Reid.

“Yesterday, nearly 80 years after the Hoover Administration took America with blissful ignorance into depression, the Dow Jones Industrial Average dropped more than 500 points – the biggest one-day decline since trading opened after the attacks of 9/11. With one major investment bank headed for bankruptcy, another sold at a bargain-basement price, and one of the world’s largest insurance companies teetering, investors rushed to sell their shares.

“With our financial markets reeling, the American people are wondering whether they will lose their jobs, whether they will be able to pay their child’s next tuition bill, whether their pension and retirement savings will be safe.

“There is no reason to think we are headed into an economic depression. There is no reason to panic. Yet one Senator – John McCain – woke up yesterday morning, surveyed the state of the U.S. economy, summoned the ghost of his fellow Republican, Herbert Hoover, and declared, ‘The fundamentals of our economy are strong.’

Even his helpers, like Mike Huckabee, aren't helping, recounting his long history against government and regulation.

I don't want Paulson and Bernanke making these huge decisions outside public scrutiny, but I certainly don't want John McCain or his picks doing it, either. Just consider that, in a McCain Administration, the guy with this unbridled power would likely be Phil Gramm.

More on what I think could be done in a bit.