Two Cheers for Paulson

Later this morning, Henry Paulson and banking leaders will discuss the mortgage crisis in Washington at the National Press Club--all part of the government's effort to get lenders to go easy on desperate homeowners and forestall more foreclosures. It's hard to say that Paulson has exactly aced this thing so far. The crisis surprised him as much as anyone but can you imagine if we still had John Snow or Paul O'Neill in there while this thing was going on? As bad as it's been the past few months--and who knows where it's going--just the idea of having a Goldman Sachs executive in there who's known as a market whisperer has probably staved off what could have been a much worse situation. All the jawboning is good, but at some point we need regulations and statutes about predatory lending and a real look at the credit agencies, as my colleague Jesse Eisenger presciently noted months ago. There's been a tendency to blame low interest rates per se as the cause of this crisis and that may be warming to the heart of the bond markets but the crisis is one of a bad housing industry, not bad monetary policy. In any event, Paulson doesn't seem to have the 1990s Rubin ability to calm jittery markets but it's worth thinking about how bad it would be if we'd been stuck with a Treasury Secretary who wasn't from the street.