The Post’s Paulson Puff

The Washington Post goes long with yet another Henry Paulson profile. There’s not much new here—add it to the list of Great Man Theory pieces lionizing Paulson, this time as someone with the flexibility of mind to change his thinking as circumstances dictate. And this is only part one of two.

Ultimately, Lehman failed, not because of Paulson’s convictions about how free markets should work but because he could not arrange a deal to save the firm, even with taxpayer money.

The fallout from Lehman’s bankruptcy filing Sept. 15 was severe. The firm had relationships with a wide range of hedge funds and financial firms. Some could not get their money back. Suddenly, investors on Wall Street could no longer be assured that their money was safe in any investment bank.

So “he could not arrange a deal to save the firm, even with taxpayer money”? I think if Paulson had wanted to prevent a Lehman bust he could have prevented a Lehman bust. Indeed, a few hours later he does just that with AIG. How does that work?

Just a day later, Paulson dropped publicly any pretense that large firms would be allowed to fail. Along with Timothy F. Geithner, president of the Federal Reserve Bank of New York, Paulson put together an $85 billion loan for the insurance titan American International Group.

Don’t get me wrong: Paulson has a nearly impossible job and I’m glad he’s not as rigid as Andrew Mellon, say. But the press loves officials who liberally hand out access (see: coverage of John McCain before and after he shut down the Straight Talk Express sessions this summer), and I think we could do with a bit more skepticism about the Treasury Secretary.

And these Paulson stories are letting him off the hook for his role in creating the crisis? Check out this Bloomberg story by Mark Pittman from more than a year ago:

Treasury Secretary Henry Paulson says the U.S. is examining the subprime mortgage crisis to ensure that “yesterday’s excesses” aren’t repeated. He could be talking about himself and his former firm, Goldman Sachs Group Inc.

Paulson, 61, doesn’t mention that Goldman still has on the market some $13 billion of almost $37 billion in bonds backed by subprime loans or second mortgages that it created while he was chief executive officer. Those bonds have an average delinquency rate of almost 22 percent, higher than the average of other subprime bonds from the period, according to data compiled by Bloomberg.

We need more of that kind of skeptical reporting on Paulson. The press is searching for its hero narrative, and it’s trying a bit too hard.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.