Bush finally finds a good 'ad man' in Paulson

Five years ago, President George W Bush was looking for someone to sell his tax cut to the American people. He selected John Snow for the job, and installed him at Treasury.

It was unfair to cast Snow, a former chief executive of CSX Corp, in that role. But Bush needed someone to sell his plan, and Paul O'Neill wasn't interested. (Willy Loman was unavailable. Hank Paulson is putting Snow to shame.)

The current Treasury secretary is the ad man to Snow's salesman. Paulson comes up with a new marketing gimmick every month to promote the government-led, private-sector plan to help homeowners hang onto the homes they couldn't afford. All that's missing is a catchy jingle.

In the beginning, there was MLEC, for Master Liquidity Enhancement Conduit. The Wall Street humor factory was quick to provide its own acronym: More Losses Expected to Come.

MLEC was really a Super-SIV, or structured investment vehicle, designed to purchase the assets of SIVs after their source of funding "" the asset-backed commercial paper market "" dried up.

Citigroup Inc, Bank of America Corp and JPMorgan Chase & Co agreed, with some gentle coaxing, to start a proposed $80 billion fund to purchase SIV assets to avoid a fire-sale liquidation. Weeks passed.

Banks failed to line up to sign up. First the size of the proposed fund shrank. Then its raison d'etre evaporated, as banks absorbed their SIVs onto their balance sheets. MLEC MAUD (met an untimely death).

Next Paulson came up with Hope Now (Despair Later?), an alliance to help a select group of sub-prime borrowers (those who were current on their mortgage payments) keep their homes by freezing mortgage rates or helping borrowers refinance.

The private-sector initiative, coordinated by the public sector (the Treasury), was a formalised process for getting borrowers and lenders to renegotiate the terms of the loan.

Admittedly, the process is more complicated when the lender has nothing on the line, having bundled and sold the loan before the ink was dry.

Securitisation seemed to free mortgage originators from the burden of performing due diligence. Why bother to document employment, income or assets for a loan applicant if you collect a fee and aren't on the hook if he defaults?

Whether it was improper incentives, lax regulation or misplaced faith that house prices could only go up, lots of people and institutions are now on the hook, which is why the government has to give the appearance of "doing something", even if it's largely cosmetic.