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Treasury chief Paulson on verge of historic new powers

The administration's bailout plan would make him temporary overseer of the US financial system.

By Staff writer of The Christian Science Monitor / September 23, 2008

Front and center: Treasury Secretary Henry Paulson, shown on 'Fox News Sunday,' is the public dealmaker for the rescue plan.

Freddie Lee/Fox news Sunday/AP



In recent weeks Henry Paulson Jr. has become one of the most famous and, perhaps, consequential US Treasury secretaries since Alexander Hamilton assumed the office on Sept. 11, 1789.

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Secretary Paulson is not the sole architect of the Bush administration's bailout strategy for the US economy, of course. By all accounts he is part of a troika of top policymakers with Federal Reserve Chairman Ben Bernanke and New York Fed Chief Timothy Geithner.

But as the public face and dealmaker of the plan, Paulson is the one most in the spotlight. Moreover, bailout legislation submitted to Congress by the White House over the weekend would transform Paulson's office into that of temporary overseer of America's entire financial system.

This may not be the role that former Goldman Sachs head Paulson envisioned when he signed on as President Bush's third Treasury chief.

"But he has to do this. He has no choice," says Peter Morici, a business professor at the University of Maryland and the former chief economist at the US International Trade Commission.

The proposed expanded powers for the Treasury secretary are one aspect of the Bush bailout plan that has drawn criticism from Democratic members of Congress.

Under the proposal, the United States Treasury would have the power to buy virtually any financial instrument from any institution, as a means to relieve it of bad assets and pump credit back into the economy. New Treasury staff would help manage this program, although the administration foresees contracting with private firms to manage its new asset holdings.

Oversight of Treasury sought

For the most part lawmakers aren't grumbling about Paulson himself.

"We've got the right man" to deal with the problem now, said Sen. Christopher Dodd (D) of Connecticut, chairman of the Senate Banking Committee, in a broadcast interview on Monday.

What lawmakers do want is more oversight of the program than the White House has outlined so far. Many are troubled by wording in the proposal that appears to bar any review of Treasury's bailout actions by the courts or other administrative agencies.

Rep. Barney Frank (D) of Massachusetts, chairman of the House Financial Services Committee, said Monday that he would propose an oversight board that would report to Congress at least monthly.