The Swagel paper, about which I have written here and here, tells us who Treasury consulted about how to handle the financial crisis. Care to guess? It wasn’t the White House:

Other aspects of the decision-making were self-imposed hurdles rather than external constraints. Notable among these hurdles was chronic disorganization within the Treasury itself, and a broadly haphazard policy process within the Administration (and sometimes strained relations between Treasury and White House staff) that made it difficult to harness the full energies of the administration in a common direction.

It wasn’t Congress. Treasury thought legislative action would only be possible when Paulson and Bernanke could truthfully say that the crisis was at the doorstep:

The difficulty of getting legislation enacted was especially salient in 2007 and 2008, the first two years after both chambers of Congress switched from Republican to Democratic leadership. A distrustful relationship between the Congressional leadership and President Bush and his White House staff made 2007 an unconstructive year from the perspective of economic policy….

It wasn’t the public:

There was little public defense of the proposal—instead, Treasury efforts were aimed mainly at the 535 members of Congress whose votes were needed.

No, the only people Treasury wanted to talk to were “market participants,” the failures, the arrogant fools who drove the economy off the cliff, suddenly reduced to groveling for taxpayer money. Well, not exactly groveling. Demanding. Holding the nation hostage. Refusing to lift a finger unless they got their way. Treasury kept in constant touch with its constituents, this pack of howling testosterone-poisoned alpha dogs. Here’s one undated example:

More near term in vision was work being done on so-called “break the glass” options— the reference being to what to do in case of an emergency. This work evolved from a recurring theme of input from market participants, which was that the solution to the financial crisis was for Treasury to buy up the “toxic” assets on bank balance sheets.

And what would that cost? The estimate was $250bn. I wonder where that low-ball estimate came from. By the way, I particularly admire Swagel for giving us the metaphors used by Treasury insiders in their deliberations, like “break the glass.” It adds a very human touch and gives the reader a real feel for the people involved.

To be fair, Swagel thinks Treasury should have done more to explain its actions to the public that is expected to pay off the financial pirates:

[A]n honest appraisal is that the Treasury in 2007 and 2008 took important and difficult steps to stabilize the financial system but did not succeed in explaining them to a skeptical public. An alternative approach to this challenging necessity is to use populist rhetoric and symbolic actions to create the political space under which the implicit subsidies involved in resolving the uncertainty of legacy assets can be undertaken. It remains to be seen whether this approach will be successful in 2009.

This last statement is Swagel’s snide way of saying that both the Bush administration and the Obama administration operate on the belief that the only way out is to subsidize the rich. Apparently, no one has the moral character to make their friends and supporters eat their losses.