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Tony Fratto: Paulson's Auto de fé


Yesterday's testimony by Hank Paulsonbefore the House Committee on Government Oversight was ostensibly billed to review the facts of last year's merger of Bank of America and Merrill Lynch .

What it turned out to be - as anyone who follows the ebb and flow big crises in this town could have predicted - was the Washington equivalent of an Auto de fé.

Hearings like this are rarely about facts, and frequently about distributing pain.

Dealing with a major crisis in real time is always messy, and the financial rescue of 2008 was no exception. With the survival of the American financial system in the balance, decisions had to be made and carried out -- with full knowledge that second-guessing would come long after the crisis had passed, including from 535 Torquemadas on Capitol Hill.

Those decisions were recommended by former Treasury Secretary Hank Paulson - working in cooperation with Fed Chairman Ben Bernanke, then-New York Fed President Tim Geithner, and the White House - and the decisions were made by President Bush.

Economic historians will long debate both the origins and resolution of the financial crisis. (Remember that scholarly research continues today on the origins and policy responses of the Great Depression.) Every decision made during the crisis deserves, and will receive, thorough analysis and review, and that's appropriate. Researchers will analyze those decisions with the full benefit of time and the accumulation of more perfect information, neither of which were in sufficient supply during the crisis.

But what is clear today is that the actions taken last fall, however messy and imperfect, saved America's financial system. The programs put in place then continue today with very slight and only superficial modification by the Obama Administration.

And an idea discarded at the time - purchasing toxic assets - while theoretically elegant, has proven so practically unworkable that even today, eight months later, it remains still-born. To jettison that idea in favor of capital injections, knowing that a torrent of criticism would follow, was not an act of deceit, but of courage.

The Congressional Inquisition will continue, as these things always do - until every last measure of pain has been meted out. But over time history will accurately grade Hank Paulson's decisions both fairly and kindly.

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Tony Fratto is a CNBC on-air contributor and most recently served as Deputy Assistant to the President and Deputy Press Secretary for the Bush Administration.

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