POINTING FINGERS.

Matt Yglesias writes that "one issue that I don’t think has been adequately explored yet is the extent to which our current predicament is attributable to Hank Paulson’s mismanagement of the situation ten days ago." Paulson, he says, has mismanaged the political process epically. Rather than hunkering down in a room with bipartisan congressional leaders and building an acceptable bill, he imperiously warned that the economy was teetering on the verge of collapse and that Congress would need to pass his wildly unacceptable and privately constructed and self-empowering bailout bill if they wanted there to be a financial sector when they woke up. That, uh, didn't work out so well.

But Paulson's political mismanagement doesn't much surprise me. He's not a politician. He's in a White House that is not only incapable of working with an opposition Congress, but has lost most of its best political operators. It was his economic mismanagement that requires closer scrutiny. 15 days ago, he was presented with a crucial choice: Do you let Lehmnn fall into bankruptcy and create a market panic? Or do you save it and risk insulating Wall Street from the consequences of its actions? Timothy Geitner, the head of the New York Federal Reserve, warned that you had to save Lehman; the market couldn't endure that sort of uncertainty. Paulson disagreed. Lehman fell. It was the biggest bankruptcy in history. Within days, AIG, Goldman Sachs, and JP Morgan were swallowed by the chaos. It was arguably the costliest mistake in the crisis, and it was Hank Paulson's fault. The idea that he was some sort of omniscient crisis manager who should be given instant control of $700 billion and freed from all political oversight was, on its face, absurd.

And the mistakes piled up from there. The pity of the whole process was that by playing the politics so aggressively, the Bush administration implied that the situation was, in fact, not that dire. After all: If the possibilities were so cataclysmic, then surely they'd be searching out a sure deal, not playing high stakes poker for a massive power grab. But they did the latter, and it failed. Meanwhile, most economists I've spoken to do think the stakes are incredibly high, and are queasy over what could befall the economy if no bailout is passed. But there was no way the political system was going to imbue that much trust in a guy who came from Wall Street, and who had failed so decisively a mere two weeks ago.