To call Paulson response to the credit crisis improvised does a disservice to artists. Improvisation still requires a sense of direction and purpose, the thrust of a musical piece or the likely frictions between two characters. By contrast, the Treasury/Fed program looks completely reactive, an attempt to stabilize a system when they lack a good understanding of the playing field and the nature of the turbulence.
And lo and behold, the head of the new TARP oversight panel, Elizabeth Warren, says in a very straightforward fashion what any astute reader of the press has discerned, but the media has been unwilling to say: Treasury has been flailing about. If there weren’t such large amounts of money involved, it would be comical.
From the New York Times:
Elizabeth Warren, the chairwoman of the oversight panel, said in an interview Monday that the government instead seemed to be lurching from one tactic to the next without clarifying how each step fits into an overall plan.
“You can’t just say, ‘Credit isn’t moving through the system,’ ” she said …“You have to ask why.”
If the answer is that banks do not have money to lend, it would make sense to push capital into their hands, as the Treasury has been doing over the last two months, she continued. But if the answer is that their potential borrowers are getting less creditworthy with each passing day, “pouring money into banks isn’t going to fix that problem,” she said.