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Paulson's past statements, specifically, his declaration six months ago that "our institutions, our banks and investment banks, are strong," or his statement four months, "I do believe that the worst is likely to be behind us," can lead one such as myself who disliked Bush politics before it was cool to do so to wonder about this man's credibility. Stage exit left every major investment bank in this nation, the largest mortgage bank (Countrywide), the largest bankruptcy in the history of this country (Lehman, the 2nd largest was about 1/8th the size of Lehman), the largest THREE bailouts of any single company (Fannie, Freddie and AIG), and the imminent failure of the largest thrift (WaMu), not to mention all of the trash paper sitting on the books of banks, brokers and hedge funds (see Counterparty risk analyses – counterparty failure will open up another Pandora’s box, Banks, Brokers, & Bullsh1+ part 1, and Banks, Brokers, & Bullsh1+ part 2).

Now he declares that we face a virtual financial armageddon if we do not immediately give him a revolving credit line of $700 billion+ dollars and immunity from the law and the legislature? Have I missed something here? Now, I've been known to doubt this man in the past (see Reggie Middleton says don't believe Paulson: S&L crisis 2.0, bank failure redux), but this most recent ballsy move is actually disturbing my sleep (and as cute as I may be, even I need what little sleep I can get!).

His extreme flip-flopping leads me to believe that he is either disengenious or incompetent. After all, I have considerably less resources at my disposal, and I declared as far back as April that "The worst is behind us, unless massive bank failure is considered a bad thing!".

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2nd lien products in high LTV states that have rapidly declining housing values proffer the opportunity for 100% losses with no recoveries. 

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 I think we can safely rule out incompetent as the ex-CEO of Goldman, who was just fine according to Paulson just a few months ago (of course I disagreed re: Goldman, just a few months ago as well). These statements have been excused as a forgivable attempt to soothe public concern. Well, if he is willing to manipulate public concern in one direction, what makes one think he is not willing to do the same for a different cause? Since when did lying (or being incompetent) become forgivable in public office? Did Rumsfield do it for Aghanistan? How about Bush and his WMDs in Iraq?

Arianna Huffington puts it best:

 See if this sounds familiar:

There is a gathering threat to the safety of the United States. We must take immediate action. Congress must quickly grant the President and the Secretary what they want and also give them full and unfettered authority to execute the plan.

Welcome to Economic Shock and Awe (or as some have dubbed it, according to Paul Krugman, "the Authorization for Use of Financial Force").

Even the amount of taxpayer money being bandied about -- $1 trillion -- is similar. Think you got your money's worth for the Iraq war? Congratulations -- you're about to buy another pricey debacle.

We've seen how negligent the Bush administration is with our money -- flushing billions on wasteful, mismanaged Iraq reconstruction and Katrina recovery projects.

Now the same folks who brought us those no-bid, profit-guaranteed, crony-friendly, war-and-disaster-profiteering boondoggles want us to hand them control of a $700 billion Wall Street slush fund -- with no strings attached. How dumb -- or frightened -- do they think we are?

Let's get this straight. Overleveraged financial institutions, real asset developers and industrials are going to go bust. This is going to happen whether you spend $700 billion+ or not. So whey spend the $700 billion+?

"Shock and Awe" 2.0!