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Marketplace Scratch Pad

What really happened a year ago

Scott Jagow Sep 15, 2009

Today’s must read comes courtesy of GQ magazine. Former Bush speechwriter Matt Latimer tells an insider’s story of what happened at the White House as the $700 billion bailout was being debated last September. Holy Moley.

Click here to read the entire article. It’s long but well worth it. I won’t even get into the stuff about Hillary, Obama, McCain and Palin, but it’s there, toward the end of the article, if you want your juicy political fix.

Anyway, Latimer describes the tense hours before President Bush was to address the country in a prime time speech about the bailout:

He wanted to explain what he was seeking and to defend it. He especially wanted Americans to know that his plan would likely see a return on the taxpayers’ investment. Under his proposal, he said, the federal government would buy troubled mortgages on the cheap and then resell them at a higher price when the market for them stabilized.

“We’re buying low and selling high,” he kept saying.

The problem was that his proposal didn’t work like that. One of the president’s staff members anxiously pulled a few of us aside. “The president is misunderstanding this proposal,” he warned. “He has the wrong idea in his head.” As it turned out, the plan wasn’t to buy low and sell high. In some cases, in fact, Secretary Paulson wanted to pay more than the securities were likely worth in order to put more money into the markets as soon as possible. This was not how the president’s proposal had been advertised to the public or the Congress. It wasn’t that the president didn’t understand what his administration wanted to do. It was that the treasury secretary didn’t seem to know, changed his mind, had misled the president, or some combination of the three…

When it was explained to him that his concept of the bailout proposal wasn’t correct, the president was momentarily speechless. He threw up his hands in frustration.

“Why did I sign on to this proposal if I don’t understand what it does?” he asked.

Gulp. From Latimer’s perspective, it’s clear the Treasury Secretary was wearing the pants:

WE WROTE SPEECHES nearly every time the stock market flipped. Meanwhile, the White House seemed to have ceded all of its authority on economic matters to the secretive secretary of the treasury. The president was clearly frustrated with this. I was told that at one Oval Office meeting, he got very animated and exclaimed to Paulson, “You’ve got to tell me what you’re doing!” (In the weeks that followed, Paulson changed his spending priorities two or three times. Incredibly, he’d been given the power to do with that money virtually anything he pleased. All thanks to a president who didn’t understand his proposal and a Congress that didn’t stop to think.)

If that isn’t enough, how about this? Bloomberg reports that Warren Buffett was approached about insuring Lehman’s assets before Lehman went under, but he didn’t get the information he requested because he didn’t know how his voice mail worked:

Buffett was asked about backing Lehman while Barclays Plc weighed a bid for the firm, he said today at a conference in Carlsbad, California. He didn’t receive the information that he requested be sent to him by facsimile and later learned that there was a voice mail that he missed because he didn’t know how to retrieve it, Buffett said.

The things you learn a year later…

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