If US treasury secretary Hank Paulson thought he could cram a $700 billion (R5.7 trillion) plan to buy financial institutions' toxic mortgage-backed waste through congress with no questions asked, he got a rude awakening last week.
Paulson and US Federal Reserve chairman Ben Bernanke were grilled on the plan. Legislators were inundated with messages from constituents expressing outrage at what they saw as a bailout of Wall Street for a problem of Wall Street's own making. It took them all weekend to hammer out something they could sign off.
Why was it so hard for Paulson to close the deal? Maybe his report card holds the key.
Communication skills: C minus.
Teacher comment: Student tries hard but finds the subject difficult.
When President George W Bush needed to sell his economic stimulus plan, heavy on tax cuts, in 2002, he turned to former railroad executive John Snow. Without Snow's sales and marketing skills, Paulson can put lipstick on his plan, but it's still a pig.
Analytical ability: C.
Teacher comment: Student manifests some trouble connecting the dots.
Paulson has said repeatedly that the "root cause'' of the problem is "the housing correction, which has resulted in illiquid mortgage-related assets that are choking off the flow of credit".
The "root cause of this crisis'' was "the lack of capital in the banking system'', said Paul Ashworth of London's Capital Economics. "The only way the treasury's plan would have any meaningful impact on banks' capital ratio is if it vastly overpaid for the securities it is buying.''
If you don't diagnose the problem correctly, odds are you won't prescribe the right medicine. The troubled assets are the result, not the cause, of loose lending practices, a burst housing bubble, a glut of unsold homes and home prices that are too high relative to incomes, say many economists.
The government's acquisition of underwater assets may give banks the wherewithal to lend; it's no guarantee they will.
Credibility: C plus.
Teacher comment: Student relies too heavily on Goldman Sachs credentials.
When Paulson went before congress last week, he and Bernanke warned of dire consequences to the financial system if it failed to pass a bill quickly.
This was the same Paulson who assured congress the subprime crisis was contained, that Fannie Mae and Freddie Mac were well-capitalised and that the banking system was "safe and sound''. None of these assertions turned out to be accurate.
Social skills: D.
Teacher comment: Student relates poorly to those around him.
As Paulson presented a government rescue as the only option, the private sector somehow found alternative solutions. Self-made billionaire Warren Buffett invested $5 billion in Goldman Sachs, JPMorgan Chase bought the assets of Washington Mutual, Barclays picked Lehman Brothers clean, and Merrill Lynch saddled up with Bank of America.
The Fed has loaned so much money that its treasury holdings are down to 42 percent of its balance sheet, compared with a pre-crisis 90 percent.
The Paulson plan, as originally presented on September 20, would have bailed out the institutions holding mortgage derivatives without doing anything about the underlying homes or adequately protecting the taxpayer, who would have been taking the risk without potential for reward.
It's far from clear that this new New Deal will be the end.
Caroline Baum, the author of Just What I Said, is a Bloomberg News columnist. The opinions expressed are her own