Treasury Gets Broad Power in Bailout Bill to Hire Contractor

Treasury Gets Broad Power in Bailout Bill to Hire Contractors

By Rebecca Christie

Sept. 28 (Bloomberg) -- Treasury Secretary Henry Paulson will have broad authority to hire financial managers quickly to help manage a $700 billion asset-purchase plan, according to the draft legislation under consideration.

The bill would allow the Treasury chief to waive federal acquisition procedures ``where compelling circumstances make compliance contrary to the public interest,'' according to a summary of the draft law. The Treasury would have to notify Congress of such waivers within seven days, and also ensure procedures are in place to reach out to minorities.

If the plan is enacted, the Treasury likely will need a lot of Wall Street expertise to manage the assets it acquires, said Tim Ryan, head of the Securities Industry and Financial Markets Association. Ryan also is former director of the Office of Thrift Supervision, which oversaw the Resolution Trust Corp., the agency that liquidated failed thrifts after the savings-and-loan crisis of the 1980s.

``What we learned through the RTC process is, if we're going to throw this type of assignment at the government -- any government, state, federal, U.S., anywhere -- they're not staffed to deal with this issue,'' Ryan said in an interview last week.

Treasury's potential hiring of contractors to run the program will help because ``they'll just do a better job and they'll get it done faster, and ultimately it'll be cheaper,'' Ryan said.

Paulson has already recruited from Wall Street to help manage the current financial crisis, the worst since the Great Depression. He hired Morgan Stanley on a $95,000 contract awarded under emergency procedures to help assess options for Fannie Mae and Freddie Mac, the mortgage companies that ultimately ended up in government conservatorship.

Goldman Sachs

Paulson also last week hired former Goldman Sachs Group Inc. colleague Edward C. Forst, now executive vice president at Harvard University, on a $5,000 contract to help with the plan.

The draft legislation would allow the Treasury to select the Federal Deposit Insurance Corp. as an asset manager for residential mortgage loans and mortgage-backed securities. If the Treasury looks to Wall Street for other staff, it should find plenty of affordable talent, Ryan said.

``There are people in this business who know this asset class who have recently, in the last six months, lost jobs, and they'll take a lot less pay than they got the last time,'' Ryan said in the interview.

To contact the reporter on this story: Rebecca Christie in Washington at Rchristie4@bloomberg.net

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