Here’s Roger Ehrenberg’s assessment of what went wrong and how Paulson in particular should change his perspective to begin addressing the crisis in a way that people will support. Courtesy of Roger, at Information Arbitrage. 
Why Have Things Gone So Wrong?
Lack of transparency. Intellectual dis-honesty. Failure to read the pulse of the nation. In my adult life I have never seen a backlash so powerful or so well-timed as this. The voting public called bull#$%& on Hank Paulson, the President, Congress, Ben Bernanke, and anyone else associated with the current proposal, right in the midst of an election year. It could have been so easy. See problem. Identify key elements of problem. Quantify magnitude of problem. Develop plan to address problem in conjunction with needs of key constituencies. Clearly and thoughtfully articulate the plan to solve the problem. Put plan on floor of Congress. Pass plan. Implement. Repeat if necessary. But this is not how it came to pass.
I have been a Paulson supporter since his appointment. But he has bungled the handling of the bailout worse than an intellectual midget. This is one circumstance where IQ points, hubris and ego served as a barrier to success. He was so convinced of his righteousness and correctness that he didn’t listen. During an election year. In the midst of one of the most severe financial crises this country has ever faced. He simply missed the boat. He didn’t have a read on the pulse of the country. And it cost his bill passing Congress. And perhaps his job as well.
I said it at the beginning of the crisis and I’ll say it again: the voters, the people paying for the plan, need to trust its makers and need transparency for that trust to be cemented in their minds. Seems obvious. Seems fair. But this is not the way Secretary Paulson or his pals read the situation. They wanted supreme powers. They wanted to avoid judicial review. They wanted to steer clear of compensation caps. They couldn’t have been more wrong, either on the issues in a vacuum or in light of the needs and desires of their constituents. Market Value. Repeat after me – M A R K E T V A L U E. This is what can and should be paid for liquifying toxic balance sheets. Not a penny more. The mere fact that Mr. Paulson has been fighting against this tooth and nail has only destroyed his credibility as a bright, pragmatic thinker, a leader that can get us out of this mess. Instead, he reads as a pandering ex-Wall Street executive, a man more concerned with preserving the status quo than helping usher the financial markets into a new, more customer-focused and risk-managed phase. This is a world that can still be profitable and create value for customers, employees and shareholders alike, but perhaps at a lower level and with more stable returns. Not a bad thing. And just maybe a really good thing. But this is not what lies deep within Mr. Paulson’s heart. The days of yesteryear are what he still pines for.
If Secretary Paulson can’t adjust his thinking, and put transparency and clarity first, he should step down and make room for someone who can. At this point the job is less about rocket science and more about doing the right thing for those to whom much wrong has been done – the U.S. taxpayer. They are going to get us out of this and they are the ones who should benefit. Unfortunately Mr. Paulson hasn’t seen it this way so far. Hopefully, he’ll be able to set his ego and personal interests aside and use his substantial intellect and aptitude for good.
