The unprecedented volatility on global markets which sees all asset classes swinging wildly on the latest bank bailout or political duck-shove requires one vital development — a new US President.

George W Bush is sitting there like the CEO of the free world just waiting to be put out of his misery.

The world has long lost respect for Bush but now even his own Texan Republicans are voting comprehensively against his recommendations.

It was Michael Moore who perhaps best summed up what happened politically in the House of Representatives on Monday, with this spray overnight.

What Moore doesn’t mention is that the US also desperately needs a new finance director after the dreadful selling job performed by Treasury Secretary Hank Paulson.

Paulson only swung into action with his bailout plan on Thursday, September 18, the day it looked like his old firm Goldman Sachs would go the same way as Merrill Lynch, Bear Stearns or Lehman Brothers.

The failure to sell the plan as anything other than a bailout of Wall Street rests with Paulson, because he was so hopeless in providing any detail even after getting blasted by numerous politicians for his skinny three page proposal.

The American public was whipped into a frenzy against the proposal on the grounds that Wall Street bankers were going to make another fortune. Truth be known this was actually a desperate plan to stop a global banking collapse as American financial prestige dissipated.

In reality, someone like Lehman CEO Richard Fuld saw his net worth plunge from more than $500 million to less than $50 million in 18 months given his big holdings in Lehman stock.

Even the man who built AIG over 35 years, Hank Greenberg, still controlled about $15 billion worth of stock after being forced out by Eliot Spitzer in 2005, so his net wealth is down by more than 90% as well.

The situation is very different with Hank Paulson because he raised about $US485 million in mid-2006 by selling 3.23 million Goldman Sachs shares as part of a deal with the Office of Government ethics committee when he took the Treasury job.

George Bush did Paulson a huge financial favour by poaching him and then Paulson presided over the greatest contemporary US political and financial fiasco.

If Paulson had come out and pledged $US200 million of his own money to the bailout and encouraged others who had escaped with their fortunes to do likewise, it would have made the whole package a lot easier to sell.

Instead, he should be handing over to someone less conflicted and the Congress should handle the situation with a much less expensive overall package and more situational rescues.

The two big overnight proposals of lifting deposit insurance from $US100,000 to $US250,000 and relaxing mark to market accounting were sensible moves.

Combining that with some co-ordinated global cuts in official interest rates and more central bank injections should see the system stagger through the US election process when either Obama or McCain can start with a clean slate.

*Listen to last night’s discussion about the bailout and ABC Learning with Libby Gore on 774 ABC Melbourne.

Peter Fray

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