Academic

We've noted that the string of bailouts or rejected bailouts has been done either on the fly or pursuant to the extremely broad (possibly overbroad?  Those FDR agencies have massive congressional mandates) authority that the Fed is lucky enough to have in section 13 of its governing act.  Paulson doesn't like bailouts, but sometimes he has ordered them, in league with the Fed.

We know this, because his Blueprint on financial regulatory reform would specify the availability of the discount window further.  The idea would generally be: broad powers to open it to whoever, look to aid industry sectors, rather than struggling individual institutions, and clearer up front rules on availability.  And, more we-don't-like-bailouts perspectives on it all.  Here's a taste (from p156 of the document):

A clearer articulation of the Federal Reserve?s lender of last resort function to include
more types of financial institutions might be viewed as an expansion of the federal safety
net. To avoid that outcome, a sufficiently high threshold for invoking market stability
discount window lending (i.e., overall threat to financial system stability) should be
established, and it should include significant checks on the process (e.g., maintaining the
current super majority vote of the Board of Governors). Market stability window
discount window lending should be focused wherever possible on broad types of
institutions as opposed to individual institutions. In addition, market stability discount
window lending would have to be supported by Federal Reserve authority to collect
information and conduct examinations of borrowing firms in order to protect the
Federal Reserve (and thereby the taxpayer).