Treasury Secretary Henry Paulson might be the weakened Bush administrations only hope for selling Congress this week on a historic $700 billion bailout of U.S. financial institutions. But even President Bushs best and perhaps sole economic salesman will test his credibility before a willful Democratic majority that is eyeing the unpopular presidents departure.
He has a strong background and a deep reservoir of expertise in the real world, said Sen. Bob Casey (D-Pa.), who sits on the Banking, Housing and Urban Affairs Committee. It wouldnt be worth much if he werent willing to engage with Congress and to Members across the board. But Bush has allowed him to operate free of an ideological straitjacket.
Paulson will appear before the banking panel today, and Casey, while having questions about the bailout, said Paulson has done a good job under adverse circumstances and shown the urgency this crisis requires.
People defer to him as the person with the expertise, a senior Senate Democratic aide said. But, A, its still a huge ask, and B, this is a bigger problem than even a person like Hank Paulson can dig our way out of here.
Paulson will be lobbying lawmakers to accept the administrations plan to rescue the ailing economy. The proposal already has met powerful resistance from Members in both parties who fear it would give the government too much authority with too little oversight and accountability.
Still, if anyone in the administration can help craft a bipartisan solution to the nations greatest economic crisis since the Great Depression, it might be Paulson, the former Wall Street executive who cut his teeth in the early 1970s as a staff assistant at the Defense Department. Viewed as apolitical, engaging and intelligent, Paulson has formed trusting relationships on Capitol Hill since assuming his role as Treasury secretary in June 2006.
I dont second-guess Hank Paulson or [Federal Reserve Chairman] Ben Bernanke, said House Budget Chairman John Spratt (D-S.C.), who met Paulson at the Pentagon in 1969. I dont think they got this far without having enormous credibility.
Hes not the best salesman. Hes the only salesman, a high-level Democratic Senate aide said.
Paulson has more than his share of Republican allies, many of whom share the sentiment that he is the best advocate and most knowledgeable official to tackle such a massive economic issue. Senate Minority Whip Jon Kyl (R-Ariz.) said that but not for Paulson, there would likely be no deal, calling him critical to the success of any rescue plan.
Without Paulsons intervention, I doubt seriously wed be considering a package that hes talking about, Kyl said. Its unprecedented. Its more than huge. But hes responding to a critical problem.
While Republicans will have their say, Congressional Democrats are pivotal to this weeks bailout negotiations as the majority party in the House and Senate. Democrats still feel remorseful for hastily authorizing the president to use force in Iraq in 2002 and dont want to repeat the mistakes when it comes to trying the economy.
Yet some Congressional Republicans are similarly wary of the administrations economic remedy and have started to question it. Long wed to deregulation policies and fiscal discipline, many GOP lawmakers are fearful of a government-orchestrated rescue plan that has huge risks. One of the more vocal GOP Senators said Monday that the country can no longer trust the economic information they are getting from this administration, a direct attack on Paulson and his stewardship of the Treasury Department.
The administration said the bailout of Bear Stearns would stop the bleeding and solve the problem, but they were wrong, conservative Sen. Jim DeMint (R-S.C.) argued. They said $150 billion in new government spending using rebate checks would solve the problem, but they were wrong again. They said new authority to bail out Fannie Mae and Freddie Mac would solve the problem without being used, but they were wrong again.
Now they want us to trust them to spend nearly a trillion dollars on more government bailouts, DeMint said. Its completely irresponsible, and I cannot support it.
Not all lawmakers were as quick to oppose the bailout, but most have taken turns picking its pieces apart. Privately and publicly, Democrats and Republicans say the plan as proposed by Paulson and Bush will not pass unchanged.
Even as Congress criticizes aspects of the proposal itself, most Members say it isnt a personal affront to Paulson, who they view as Bushs only lieutenant with the chops to negotiate the plan. As one financial services lobbyist put it: If anyone can do this, its Paulson. If anyone has the rapport and the ability to bridge the political divide, its Paulson. Having said that, theres still real problems [with the bailout] on the Hill.
You can respect Hank and dislike the package, Spratt said.
Rep. Barney Frank (D-Mass.), chairman of the Financial Services Committee, who attacked Paulson on Monday as entirely unreasonable for asking Congress to approve the bailout within 24 hours, still made clear that he trusts the Treasury secretary.
In the coming days, House and Senate lawmakers said they will be watching closely to see whether Paulson can continue to work with both parties to try to execute such a bold plan to revive the countrys ailing economy. Sen. Bob Menendez (D-N.J.), who also shares a seat on the Banking panel, said Monday that while he appreciates Paulsons nonpartisan approach to working with Congress, he questions some of the Treasury secretarys predictions, such as those on the housing meltdown and the near collapse of Fannie Mae and Freddie Mac.
I dont have a great sense of comfort in him asking for a $700 billion bailout without guidelines or restrictions with that type of track record, and other Democrats feel the same, Menendez said.
Ultimately the test will be in what we come with and how it gets executed, and whether its transparent, honest and done in a way that meets the challenges, Menendez added. Thats the judgment that ultimately will be cast on him.