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Panel on Paulson's Rescue Update

Panel on Paulson's Rescue Update

FOX News Special Report With Brit Hume - November 12, 2008

(BEGIN VIDEO CLIP)

HENRY PAULSON, TREASURY SECRETARY: When we went to congress, illiquid assets looked like the way to go. As the situation worsened, the facts changed.

I will never apologize for changing an approach or strategy when the facts change. I think the apology should come the other way, if someone doesn't change when the facts change.

(END VIDEO CLIP)

HUME: And what he is saying is that the facts changed sufficiently from the time that he conceived this legislation to bail out financial institutions and buy up the distressed assets to do it, so much in a couple of weeks that by the time the bill was actually signed, Henry Paulson decided that buying up those bad mortgages and trying to take them off the books of banks across the country was not the way to go, and the better idea was to pump money in the form of stock purchases into the banks themselves and let them work it out.

So, what about this? Thoughts on it from Fred Barnes, Executive Editor of "The Weekly Standard," Mara Liasson, National Political Correspondent of National Public Radio, and Mort Kondracke, executive editor of "Roll Call," all are FOX News contributors.

Mort, there was some consternation in Congress -- there is always consternation in Congress -- about this decision.

MORT KONDRACKE, EXECUTIVE EDITOR, "ROLL CALL": That's what they do in congress.

HUME: That's right. They get consternated.

But there was some good news as well. He basically said that the U.S. financial system was back from the brink. What about this change of approach by Paulson? Right move, smart move, what?

KONDRACKE: I think it was the right move because it was so complicated and so time consuming to try to value these assets and try to figure out how to stage an auction or a reverse auction to try to buy them that it was just not going to work.

But it's been pretty clear for a while that that's not what he was going to do, but, rather, that he was going to, as you say, buy stock in these companies --

HUME: He has been doing that, but I didn't know that the program to do that had been called off. Did you?

KONDRACKE: No, I didn't know that it had been called off, but it was pretty obvious that he wasn't doing that.

The problem here is that he told Congress one thing. He got authority to do it with their understanding that he was going to buy these troubles assets--

HUME: But didn't he also get authority to do what he is doing?

KONDRACKE: He is entirely within his job. But John Boehner, among other people, was complained that he was somehow misled.

HUME: Bait and switch.

KONDRACKE: Yes.

I thought, actually, that part of the news today was that they were going to invest now in credit card companies and auto loan companies and student loan companies, and that this is an ever-expanding program.

And, actually, helping auto loan companies will presumably help the auto industry, even though he said $700 billion is off limits to the auto industries directly.

HUME: He didn't say it was off-limits. He said it wasn't designed for that. He sounded chilly to the idea. Of course, on the hill-

KONDRACKE: They're probably going to change the law next week.

HUME: Mara?

MARA LIASSON, NATIONAL POLITICAL CORRESPONDENT, NATIONAL PUBLIC RADIO: I think the fact that he changed tactics is a good sign. This idea of buying stock in these companies was talked about from the beginning. And as it turns out, even though Congress was aghast that he was given broad, unspecified authority, it probably was helpful.

HUME: Yes, they gave him authority.

KONDRACKE: Yes, they gave him the authority to this however he sees fit.

It turns out the financial sector is a lot bigger and more complicated than we thought it was and includes all these other entities.

But the other thing that's happening is I think that the credit - - whatever we're calling it, clog, stall, or freeze, seems to have been loosened and credit abated, and credit is actually moving now.

I think the big question is that there is so much more of this financial crisis to be unfolded. I mean, there might be tremendous personal bankruptcies, credit card problems. Unemployment has yet to reach where it's going to go. It is already heading upwards to eight percent and above.

And that's what the Congress is also going to have to deal with.

But as far as Henry Paulson changing his tact, that's a good thing.

FRED BARNES, EXECUTIVE EDITOR, "THE WEEKLY STANDARD": I hope so. The market didn't like it. And remember, the market is always the bet on the future. It is not a final verdict by any means.

HUME: There was other bad news today.

BARNES: I know. Look, this announcement by Paulson didn't change it. The market didn't say, well, that's bad news, but this is great news, and shoot up. That didn't happen. But, as I say, that's hardly a final verdict.

What the law I thought gave him authority to do was to purchase and to make and fund commitments to purchase troubled assets from any financial institution. Well, this isn't that.

He's not purchasing these assets, which made sense, the original idea. This is what Japanese banks didn't do - the Japanese government didn't do in the 1990's, and they had a decade more of stagnation.

What he is doing now makes sense, there is no question about that. But it is an abrupt change, and I understand why John Boehner said wait a minute, this is not--

HUME: But does it strike you that what he has done here is looked at the practicability of quickly accomplishing the kind of large scale asset purchases, and he can do this faster and then let the banks work it out with the loan holders, right?

BARNES: I understand that, but it is a rather abrupt change.

HUME: I know it's abrupt. That's why we're talking about it. Was it the right thing to do or wrong thing to do in your view?

BARNES: I'm not sure whether it's the right thing to do or not.

And, look, I think this, by doing this switch, makes it harder to say no money for Detroit, which is what he ought to say. And if Congress changes this law next week, I hope the president vetoes that change. He certainly should.

KONDRACKE: What Paulson said is that an auto company is not a bank, is not a financial institution. This was designed for financial institutions. Therefore no--

HUME: He is talking about the credit agencies for the automobile companies.

BARNES: There is a huge difference between giving capital to banks and lending institutions rather than buying bad mortgages. There is a big difference.

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