How did Paulson try to get retroactive immunity? Why, via the infamous Clause 8, of course: the clause Krugman caught Paulson lying about. For those of you who came out late, here's the text of clause 8:

Sec. 8. Review.
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

In other words, Paulson wrote his proposal under the Bush administration's extremely Constitutional Theory Of We Get To Do Whatever The Fuck We Want. Quelle surprise. And Whatever The Fuck We Want includes retroactive immunity for the boiz. McClatchy:

The administration’s draft law also would preclude court review of steps Paulson might take [clause 8], something Joshua Rosner, managing director of economic researcher Graham Fisher & Co. in New York, said could be used to mask previous illegal activity.

“The Treasury’s ability to, without oversight, determine (that) a financial institution (is) an agent of the government seems like it could be used to serve several purposes, including limiting the potential liabilities of an institution or its executives,” he wrote in a note to investors late Sunday.

But... But... Why would "the safe heads from the investment banks" want retroactive immunity for anything?

Could it be because they're being investigated by the FBI and even the SEC for crimes?

The FBI is investigating whether fraud played a role in the troubles at Fannie Mae, Freddie Mac, Lehman Brothers and American International Group, bringing to 26 the number of bureau investigations of institutions tied to the mortgage debacle, according to two sources familiar with the developments.

At the same time, the Securities and Exchange Commission has opened more than 50 investigations into disclosure and valuation of housing-related investments at banks, insurers and credit rating agencies, Chairman Christopher Cox told the Senate Banking Committee yesterday.

Let the process play out, say I. Surely we all should know whether the people we're handing over a trillion dollars to are criminals, or not, eh?

So let's wait and find out. Or -- now here's a novel idea -- some of the executives could confess their crimes, make voluntary restitution (a home, a jet), and then get their bailout?

NOTE Haw. I called it yesterday. The foolish “executive compensation” talking point is a mask over the ulcer: The real issue is executive jail time. Snicker.