When crisis strikes, it has often been Congress’s knee-jerk reaction to accept whatever the executive branch has to offer. The Patriot Act and the Iraq War are a couple of recent examples, and the trend continues today. The current financial crisis is an issue that strikes at the hearts—and pocketbooks—of every American, and is sending Congress into panic mode again. It seems that few predicted a worsening crisis after the subprime bubble months ago, listening to President George W. Bush’s serene conviction that everything was going smoothly, and Treasury Secretary Hank Paulson’s repeated assurances that, “It’s a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation.”

Now, the secret is exposed. The American economy is facing a crisis unprecedented in modern times only by the Great Depression. Secretary Paulson is demanding our trust along with a $700 billion check—we should give him neither. It is illogical and rash to grant Paulson $700 billion when he was unable to prevent the crisis in the first place, or even to sense it was coming. As a guardian of the American economy in one of the highest offices in the nation, he has failed at his post. Some might argue that the economic factors leading to this crisis are difficult to control or predict, but that is not the case. President Bush admitted in his September 24 address to the nation that “most economists agree that the problems we are witnessing today developed over a long period of time.” Last week, Dean of Harvard Business School Jay O. Light called the crisis a “slow-motion train wreck,” implying it had been a long time in coming. With these sorts of opinions about the economy, it’s troubling that Paulson did not have such foresight. A Secretary of the Treasury who is unable to notice or acknowledge the symptoms of the crash should not be given an enormous sum to attempt to set us on track. It’s not surprising that his bailout solution is unpopular among economists and, according to polls, the American public. In a recent poll, 55 percent of Americans indicated that they do not favor bailing out private companies using taxpayers’ money, which is what this $700 billion purchase of mortgage-backed securities composes. Investors George Soros, Carl Icahn, and Jim Rogers, as well as about 200 university economists—including several from Harvard—are a handful of those who have vocally denounced Paulson’s bailout plan. Possibly more disturbing than the economic flaws of the program are the ethical issues. As the former CEO of Goldman Sachs, Paulson has a conflict of interest. It seems that it would be really difficult for Paulson—or anyone given control of $700 billion—to resist helping out his former business buddies. Not surprisingly, Goldman Sachs has much to gain under the plan. If none of these reasons send out warning bells to Americans, the proposed freedom from review for Paulson’s $700 billion should. As former chairman of the Harvard economics department Oliver Hart stated, “We’re meant to trust the Treasury to enact this plan in a reasonable manner, but they want a carte blanche, and this is worrying.” It is worrying, and suspicious. In wording reminiscent of the Patriot Act, Section 8 of the bill states, “Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.” In a refreshing act of bipartisanship, both presidential hopefuls have strong reservations about this part of Paulson’s plan. Senator Barack Obama said, “Given the breach of trust we have seen and the magnitude of the taxpayer money involved, there can be no blank check.” In a surprising divergence from President Bush’s sentiments, Senator John McCain proclaimed, “Never before in the history of our nation has so much power and money been concentrated in the hands of one person.” In a way, President Bush is correct when he puts the burden on Congress to act. But, it should act on the American people’s interest and not Paulson’s. To Congress’s credit, it proposed some limitations on Paulson’s power in the plan. That said, these modifications were not adequate to make up for the many flaws of the bill. For example, there were proposed modifications by Congress to give the money in smaller installments, beginning with $250 billion, still a monumental sum. For a hasty plan to fix the economy with $700 billion of US taxpayers’ money, this was a hasty modification on Congress’s part. Congress should not be afraid to reject Paulson’s flawed plan, as they fortunately have just done in a close 228 to 205 vote. This highlights Paulson’s incompetence to fix an economy that floundered under his oversight. Risking $700 billion and potentially over a trillion dollars of taxpayer money is enough incentive to act against the plan.


Nafees A. Syed ’10, a Crimson editorial editor, is a government concentrator in Leverett House.