The new improved Paulson plan

The U.S. government will become the investor of last resort. Get ready, America: You're about to own Wall Street

By Andrew Leonard
Published October 11, 2008 12:08AM (EDT)

Two passages stand out in the statement released late Friday afternoon by Treasury Secretary Henry Paulson, after the conclusion of a meeting between "G-7 Finance Ministers and Central Bank Governors."

We are developing strategies to use the authority to purchase and insure mortgage assets and to purchase equity in financial institutions, as deemed necessary to promote financial market stability. As we develop plans to purchase equity, as in the approach we are taking to broad mortgage asset purchases, we are working to develop a standardized program that is open to a broad array of financial institutions. Such a program would be designed to encourage the raising of new private capital to complement public capital. Consistent with the legislation, any equity the government purchases through a broadly available equity program would be on a non-voting basis, except with respect to the market standard terms to protect our rights as investors.

I am not entirely sure what merit there is in being a shareholder in Morgan Stanley or Goldman Sachs on a "non-voting" basis. If my tax dollars are going to be used to rescue a Wall Street bank, then, by golly, I want a seat on the board of directors. If we're going to nationalize the bums that made this mess, let's not pussy-foot around.

As recent developments have demonstrated, the market turmoil is a global event. Governments around the world have taken actions to address financial market developments, and international cooperation and coordination has been robust. It is critical for governments to continue to take individual and collective actions to provide much-needed liquidity, strengthen financial institutions, enhance market stability, and develop a comprehensive regulatory response. We must continue to closely coordinate our actions and work within a common framework so that the action of one country does not come at the expense of others or the stability of the system as a whole.

Manifesto for a New World Order? Perhaps one of the unexpected consequences of a truly global economy will be actual global governance.

Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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