Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

The Chinese might be excused their confusion. The political theater being played in Washington, DC, was new and strange. A conservative, free-market administration led by businessmen was proposing unlimited state spending to nationalize a large part of the housing finance system. The Republican electorate was outraged by the thought of assisting undeserving mortgage borrowers and the New Deal machinery that had aided and abetted their fecklessness. But to Paulson the systemic imperative was obvious. And President Bush stood behind him. “It was a tremendous act of political courage,” Paulson gushed, “It was as if, in the last days of his administration, the president were suddenly switching sides, supporting Democrats and opposing Republicans on matters that went against the basic principles of his administration. But he was determined to do what was best for the country.”25 Paulson was registering a basic rift within American conservatism. The right wing of the party could not be counted on to give support to measures that were unpopular and distasteful, but were clearly necessary to save “the system.” Paulson recognized that the authorization he was asking for was unprecedented. “I don’t know if any executive branch agency had ever before been given the authority to lend to or invest in an enterprise in an unlimited amount. All I could do was argue that the extraordinary and unpredictable nature of the situation warranted the authority in this case.”26 He also knew that i...