Paulson's conflict of interest

In a recent editorial in the Times, Paul Krugman details how Henry Paulson's treasury department has been very slow to buy equity stakes in financial firms. Why is the United States, where this whole crisis began, a Johnny-Come-Lately in adopting a sensible rescue plan? I fear Krugman may be too polite when he pins the blame mainly on laissez-faire ideology:

It’s hard to avoid the sense that Mr. Paulson’s initial response was distorted by ideology. Remember, he works for an administration whose philosophy of government can be summed up as “private good, public bad,” which must have made it hard to face up to the need for partial government ownership of the financial sector.

What about the strong financial incentives that Paulson, and his golden boy Neel Kashkari, have to favor banks and their executives over taxpayers? Both men were executives at Goldman until recently. It would be surprising if they did not see themselves returning to banking jobs after their stints in government service come to a close. How vigorously can we expect a man to work on behalf of the public interest when doing so could cost him dearly in terms of future compensation? Beyond the financial incentives, there's the matter of Paulson's longstanding friendships with his former peers on Wall Street. Seen in this light, Paulson's initial reluctance to have the government take equity stakes in Wall Street firms, and his continued foot-dragging on limits to executive pay, are no surprise.

This is not to impugn Paulson's character. The point is simply that he is confronted with a conflict of interest. The government required him to sell his Goldman stock when he became Treasury secretary, but that's hardly enough to avoid a conflict of interest. The problem is the classic revolving door in Washington, whereby executives from regulated industries are appointed to oversee those industries for a while, then return to lucrative positions in those same industries.

So here's a request to our future president (I'm hoping that's you, Barack)...please appoint someone from outside of the financial industry as our next Treasury Secretary. How about an academic? I hear there's a clever economist at Princeton, one Paul Krugman, who might fit the bill...