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In Times of Crisis, Paulson's the 'Decider'

Fannie-Freddie bailout shows Treasury sec enjoys a free hand

By Jason Farago, Newser Staff

Posted Sep 9, 2008 6:12 AM CDT

(Newser) – Last week, a small group met in the Oval Office to discuss the impending takeover of Fannie Mae and Freddie Mac. But while President Bush convened the meeting, there was no mistaking who was running the show: Hank Paulson, who had first floated public ownership and who oversaw every aspect of the bailout. The Fannie-Freddie conservatorship, which flies in the face of normal Bush policy, is only the latest demonstration of the treasury secretary's considerable clout.

As the New York Times reports, Bush has strong economic views dating from his MBA days—he harbors real antipathy for Fannie and Freddie, which he wanted to rein in as early as 2002. But now he has ceded economic policy almost completely to Paulson, a man he trusts far more than his first two treasury secretaries. One White House spokesman said, "The sentiment was, ‘You’re in charge, and I hope it works.’"

[Images (3)]

[Quotes (3)]

Treasury Secretary Henry Paulson looks on as President Bush makes a statement in the Rose Garden of the White House in Washington, Wednesday, July 30, 2008. (AP Photo/Ron Edmonds)

Treasury Secretary Henry Paulson, Jr. listens during a news conference in Washington, Sunday, Sept. 7, 2008 on the bailout of mortgage giants Fannie Mae and Freddie Mac. (AP Photo/Susan Walsh)

Treasury Secretary Henry Paulson speaks during a news conference in Washington, Sunday, Sept. 7, 2008 on the bailout of mortgage giants Fannie Mae and Freddie Mac. (AP Photo/Susan Walsh)

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Bush was in charge when it was cut taxes, deregulate, have free trade, etc. But then the old paradigm broke down, and it fell, frankly, to more serious thinkers to figure out how to cope with the current reality. - Congressman Barney Frank

I think the economy is taking Bush and Paulson to a place where they wouldn’t go on their own. In a crisis, you start bending principles, and Paulson bent principles. - Vincent Reinhart, a monetary economist at American Enterprise Institute

This is not action that we wanted to take; it was action that Secretary Paulson and others, working with the president, determined that we needed to take. - White House spokeswoman Dana Perino, on the Fannie-Freddie bailout

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In Times of Crisis, Paulson's the 'Decider'