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Thursday, July 17, 2008

Novak and the Price of Cronyism

Robert Novak has an interesting article about the price of cronyism...:

s financial storm signals appeared the last 18 months, there were Bush officials who urged drastic reform of Fannie Mae and Freddie Mac. But, according to internal government sources, Treasury Secretary Henry Paulson objected because it would look "too political." The Republican administration kept hands off the government-backed mortgage companies that are closely tied to the Democratic establishment. ...Paulson is a Republican, but as head of the Goldman Sachs investment bank, he had close ties with Democratic-dominated Fannie Mae. After prominent Democrat James A. Johnson left Fannie after eight years as chairman and CEO and joined the ZymoGenetics biopharmaceutical firm, he was named head of Goldman Sachs' compensation committee, helping set Paulson's abundant salary there. ...That connection clearly was not enough for Paulson to consider recusing himself from dealing with the crisis threatening Fannie, Freddie and the whole American economy. He structured the bailout and was on the phone last weekend encouraging leading investment bankers to buy Freddie Mac bonds. Financial consultant Lawrence Lindsey, President George W. Bush's former national economic director, told clients Sunday, "Surely things are somewhat amiss when a country's finance minister plays bond salesman for a supposedly privately owned company." ...Testifying before the Senate Banking Committee Tuesday, Paulson stressed there would be a federal purchase of assets only if necessary. But relying on investment bankers could be awkward for Paulson because of indiscreet jubilation from his old company. "This is our bailout," a senior Goldman Sachs official told a Wall Street colleague this week, suggesting the firm will be cherry-picking for mortgage bargains.


Read Here: http://www.townhall.com/columnists/RobertDNovak/2008/07/17/cost_of_cronyism?page=full&comments=true#comments

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