So what do you thing about the rescue plan?
That’s a question I must hear a dozen times a day. And I tell people: I don’t see a credible alternative, but I’m deeply troubled by the new power of the U.S. Treasury.
Think about it. One man has the authority to invest money greater than most countries’ economies. He can also tell the banks he supports whether they can pay dividends to their investors, whether their CEOs are entitled to a bonus, and whether they should expand their lending or pull it back.
Yes, he’s subject to political review, but that seems a formality. Fannie and Freddie had a government guarantee, and that didn’t work out so well. Now the much of the banking sector gets to join the same club.
Lord Acton once said that absolute power corrupts absolutely. The power now vested in the Secretary of the Treasury is immense. Maybe Paulson will prove to be the exception to Acton’s rule. I certainly hope so.
Douglas R. Tengdin, CFA
Chief Investment Officer
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