Bloomberg is reporting Paulson Plans to Review Off-Balance Sheet Bank Units.

Treasury Secretary Henry Paulson said the Bush administration will evaluate accounting rules for the off-balance sheet units that large U.S. banks set up to invest in assets including mortgage-backed securities.

“Transparency is important here,” Paulson, 61, said in a speech in Washington. “We need to ensure yesterday’s excesses are not repeated tomorrow.”

[Mish translation: “The very last thing we want is transparency. Damn the WSJ for leaking news of the Super-SIV before we wanted them to. As for yesterday’s excesses… Of course we want to prevent them. The market has already done so anyway so there’s no longer any money in it. The goal is to create new rules that allow new exploitation. There’s plenty of money in that for Goldman (GS), Citigroup (C), Merrill Lynch (MER), and I hate to say it even Bear Stearns (BSC)”]

“The ongoing housing correction is not ending as quickly as it might have appeared late last year,” Paulson said. “It now looks like it will continue to adversely impact our economy, our capital markets and many homeowners for some time yet.”

[Mish Translation: “At Goldman Sachs we knew full well how bad things were going to get. After all, there were record profits at Goldman were there not? Those running Bear Stearns on the other hand are a bunch of fools. It’s a shame that fools are allowed to participate in the upcoming bailout. They don’t deserve to. On the other hand, we have to thank those fools for giving us a tremendous chance to profit from the upcoming bailout. This stands a chance of being more lucrative than the S&L; bailout of the 1980’s. Bring it on!”]

Paulson stressed in his speech at Georgetown University’s law school that “I have no interest in bailing out lenders or property speculators.” Responding to a question, he added that the bank fund is “a 100 percent market-based solution.”

[Mish comment: Paulson has every intention of bailing out Citigroup. After all, if Citigroup goes down it will affect stock prices in general. Furthermore when government invites businesses to the table to dream up solutions to protect the invitees from blatantly poor loan decisions, you can rest assured there is nothing “market based” about it]

The Treasury chief also said the decline in the housing market is “the most significant current risk” to the U.S. economy and called for an “aggressive plan” by mortgage lenders to head off foreclosures.

[Mish comment: This is where it get tricky. Paulson is being perfectly honest when he says “the housing market is the most significant current risk to the U.S. economy“. The catch is that his “aggressive plan” has nothing to do with consumer foreclosures, but every attempt to make make sure consumers stay debt slaves forever. The goal is to not allow any debt slaves free themselves via bankruptcy]

“This is not about finger pointing,” Paulson said, at the same time telling mortgage servicers that “you have an obligation to help meet this challenge.” Mortgage companies must work harder to renegotiate terms for homeowners, he added, saying “the current plan is not working well.”

[Mish translation: “This is all about finger pointing. If fingers are pointed they will point at the Fed, Goldman Sachs, Citigroup, Bear Stearns, Moody’s, Fitch, and the S&P.; We must at all costs stop that finger pointing from happening.” The latter half of his sentence is where it gets tricky again. Paulson is completely honest when he says “the current plan is not working well.” Occasional truth is enough to confuse the masses. Confusion is the goal when things are “not working well“]

Paulson called on lenders including Fannie Mae and Freddie Mac to make mortgages more easily available.

[Mish Comment: Why is the chicken press silent on this reversal of opinion? Now that jumbo mortgages have frozen up, Paulson has changed his mind on GSEs. Obviously someone is holding Jumbos in need of refinancing that Paulson is worried about. I doubt it’s Bear Stearns. Who is it?]

Bloomberg is reporting Paulson Credit Push Earns Jeers From Free-Marketers.

Treasury Secretary Henry Paulson’s plan to shore up asset-backed commercial paper is drawing criticism from free-market advocates, who say it risks shielding banks from the consequences of poor decisions.

“It is disappointing,” said William Niskanen, chairman of the Cato Institute in Washington and a former member of President Ronald Reagan’s Council of Economic Advisers. “It does go against the Bush administration’s preferences. Like all bailouts, it creates a moral hazard problem. I’m unhappy with situations like these.”

“I’ve been surprised by the extent to which the administration has been willing to be involved in markets,” said Allan Meltzer, who Republican lawmakers commissioned in 1998 for a review of the IMF and World Bank. “Nobody in government is ever as pure as their statements may lead you to believe,” said Meltzer, a professor at Carnegie Mellon University in Pittsburgh.

Treasury officials’ involvement was panned by the Wall Street Journal in an editorial today. “The less-good news is that Hank Paulson and the Treasury seem to have gone out of their way to leave their fingerprints” on the plan, the Journal said. Paulson “better make sure the banks aren’t using him to delay their day of reckoning,” the paper said.

“This White House has too often put political concerns above economic principles,” said Mitchell, who now works at the Cato Institute.

I feel slighted. When is Bloomberg going to call me? I have plenty of jeers to offer on “pseudo free-market” proposals.

Mike Shedlock / Mish/