If Congress passes the bailout it will be demonstrating an extraordinary belief in the power of redemption. In the past, I have noted the fact that Secretary Paulson's failure to recognize the housing bubble, and the economic and financial havoc that would be created by its inevitable collapse, contributed to the disaster we now face.
It turns out that Secretary Paulson played an even more direct role in bringing down our financial system. The New York Times has a superbly timed piece reporting on how a 2004 change in an SEC rule allowed Bear Stearns, Lehman, and the other major investment banks to leverage themselves to unprecedented levels. Among the highlights of the story is the fact that Treasury Secretary Henry Paulson was one of the main people pushing for this change in SEC rules.
It is remarkable that Congress would be willing to give Secretary Paulson such enormous power in running this bailout given his advocacy of rule changes that played such an important role in this financial disaster, and the extent to which he personally profited from these changes. This would be like giving the bank robber who cleaned out the vaults the opportunity to set the banks finances in order -- and letting him keep the loot. Let's hear it for second chances!