They always have to go one better, don’t they? The week Europe tries to recreate the Big Bang, America decides to kick off the Big Crunch. In the eye of the storm stands US Treasury Secretary Hank Paulson: perhaps the world’s most powerful man, at least for this week. The kind of financial titan we’d never get as chancellor, because our chancellors are career politicians, not economists.

I thought Sarah Palin was an “astonishing gamble“, so I don’t have any adjectives for the choices Paulson faced last Sunday. Bail out Lehman Brothers, and leave the US taxpayer with $60bn in toxic debt (and $600bn in total exposure)? Or allow one of the States’ top five investment banks to collapse after 158 years in the business, as punishment for its unbelievable recklessness? He took the red pill. What happens now? I have no idea — and neither does Paulson. He has gambled that the global money markets will cope. But AIG and HBOS are teetering.

For better or worse, take a moment to consider the speed, muscle and steely-eyed nerve of Paulson’s response — barely days after he took the equally dramatic decision to nationalise Fannie Mae and Freddie Mac. Some contrast with the British equivalent: the mumbling, bumbling, fumbling triumvirate of Gordon Brown, Alistair Darling and Mervyn King. They made the right decision in the Northern Rock crisis — but the bank’s descent towards nationalisation was painfully, worryingly slow. And Brown’s feeble economic recovery package offers no evidence that the UK government has filled its leadership vacuum. If a Lehman-sized disaster hits a UK lender, leadership is going to matter — and Brown is no FDR, to say the least.

Filed under: gambling, jonathanbirch, labour, ukpolitics, uspolitics on September 16th, 2008