On market wisdom and Paulson's bailout...

There's certain wisdom to be had, from the five of the top hedge fund managers who testified in Congress about the financial bailout to banks. One of the points raised was that there were not enough strings attached to the capital injection (aka bailout) to banks, and that Treasury (aka Hank Paulson) should have mandated the halting of dividends, restricting cash compensation to executives, and make it more expensive for the banks (ie. the dividend yield to Treasury which is set at a low 5% for the first five years in the bailout plan).

Paulson had argued against attaching strings to the bailout since banks (or rather, the executives) would not sign up for it. We all know that's quite ridiculous. Now, he's trying to stop the banks from just borrowing these cheap funds from government and hoarding it, instead of lending again.

These hedgies point out something so obvious, but yet legislators had had troubles mandating the conditions on Paulson. No doubt, these senators feel intimidated by Paulson, a larger-than-life former top executive from Goldman Sachs, to even try to challenge his position and proposition. But, afterall, Paulson is just like Robert Rubin, his former colleague whose footsteps Paulson has followed.