Paulson Goes Begging as Bernanke\'s Dollar Defense Comes Too Lat

Paulson Goes Begging as Bernanke's Dollar Defense Comes Too Late

Posted Jun 03, 2008 12:29pm EDT by Aaron Task in Investing, Newsmakers, Commodities, Recession, Banking

Related: LEH, MER, C, OIL, USO

Hank Paulson's tour of the Middle East has taken on an unseemly quality as the Treasury Secretary has been effectively reduced to begging for both cash and relief from high oil prices.

"We are urging all oil-producing countries to open oil markets to foreign investment, which would support faster and more efficient growth," Paulson said, the WSJ reports.

Of course, Paulson can't take a hard line with OPEC because America has no energy policy and because we need foreign dollars to fund our deficit and help bail out ailing financial institutions.

"Among some sovereign-wealth-fund managers, our initiative has raised concerns that we are trying to limit the scope of their activities or release privileged information," Paulson said. "In fact, our purpose is just the opposite. [America] benefit[s] from sovereign-wealth-fund investments."

In a separate but definitely related development, Fed chairman Ben Bernanke gave a speech Tuesday morning in which he acknowledged: "The possibility that commodity prices will continue to rise is an important risk to the inflation forecast."

What really has financial markets and Fed watchers aflutter today are Bernanke's uncharacteristically strong (for any Fed chief) statements about supporting the greenback: "We are attentive to the implications of changes in the value of the dollar for inflation and inflation expectations."

Of course, if Bernanke had paid a little closer attention to the dollar previously, Paulson might not have to be going hat in hand to our "friends" in the Middle East.