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Hank Paulson is out with a book, On the Brink, which apparently chronicles the foibles of his time at Treasury during the 2008/09 credit crisis. I have not read it, but did hear him speak this morning on CNBS. He still clings to the notion that what he did was correct, and were it not for his actions, our economy would not have survived.
I have to say right up front that I find Hank Paulson to be a vile creature. His only interest was in grabbing as much money for his employer, Goldman Sachs, by fleecing as much from the taxpayers as he could possibly grab.
In the end he did a pretty good job throwing panic into the system, convincing Washington that the sun would not come up on Monday unless they appropriated nearly a trillion dollars which ultimately got funneled into Goldman Sachs.
That Hank Paulson was never tried for treason for what he did to this country still astounds me. He forced Goldman's large competitor, Lehman Brothers, out of business, pushed Bear Stearns into JP Morgan, and left Goldman nearly alone at the top of the world's money grab pyramid.
Had the natural forces of our economy been allowed to unfold, we would have watched these mammoth investment banks take their medicine, self destruct, and life would have gone on. The system would have been cleansed, and the economy prepared to rebuild. Instead, Goldman got the money, and the taxpayers were left with a sluggish economy, and a HUGE tax bill which has acted to throttle our economy for half a decade already. It just disgusts me that Paulson was, and is, powerful enough to keep his behavior deemed as acceptable while our Country paid/pays a massive price for his behavior.
I'll read the book this weekend, even though it galls me to give Hank even more money. I suspect it will be more of 'what a great job I did for America'.....which I find to be reprehensible. What's the expression, 'thou doth protest/defend too much'?
Pretty sure that many many many people have said that Paulson was one of the few ex-GS folks that moved into a leadership role in the Federal government more for a sense of service to country than any "money grubbing insider" type move. Every profile I have seen suggests he is rather atypical among those that have risen through the ranks of investment bankers, he much prefers quite low-key activities to the glitzy life that is more common to many political types.
Personal qualities aside, virtually every scholars analysis I have seen about the actual leadership Paulson exerted in his role of coordinating a global response that quickly restored functional credit markets has been extremely praiseworthy. The degree to which the collapse of Mortgage Backed Securities devastated multiple segments of the global financial landscape cannot be overstated -- many firms that were engaged in relatively low risk businesses including pension firms, annuity based life insurance firms, public finance firms and even money market / overnight cash receivables lenders were all literally forced into short term technical insolvency. The literal death of the ancient well respected firms like Lehman Bros and Bear Sterns as well as the tumultuous restructuring of firms like AIG as well as the collapse of thousands and thousands of regional retail banks cannot be overlooked.
Had any of the global money center banks in the US or Europe been sucked into the whirlpool of devastation there is widespread agreement among those on the political left, center and right that the loss of liquidity would have likely led to an utter collapse of modern concepts of currency -- the skyrocketing inflation and rapid devaluation that would come in such a global bank panic would likely have resulted in the kind of "runs on banks" that were seen in the US during the Great Depression and more recently in third world countries / emerging capitalist countries. Given the degree to which such massive currency fluctuations can literally both wipe out ancient fortunes overnight and lead to a whole new class of black market profiteers I have no doubt that any actions to ward off such brutality were justified.
I further have no doubt that in the face of such literal chaos in the streets the calls for far more radical solutions involving armed force and confiscation of everything from personal retirement accounts to collectibles made out of precious metals would have been the response of whacko polticians that had the audacity to ram through truly crazy legislation like TARP and the UAW Employment Stabilizaing Act and subsequently use dispicable strong arm tactics to use single party majorities to pass laws that one could only "know what is in 'em when they pass 'em".
You can hate on the mega banks all you want but if you think there was a better alternative I'd say you have been drinking the koolaide of the poltical class that is intent on maintaining thier power through lies and class warfare.
You can hate on the mega banks all you want but if you think there was a better alternative I'd say you have been drinking the koolaide of the poltical class that is intent on maintaining thier power through lies and class warfare.
Isn't that virtuous circle which allowed Paulson to get away with this scam to begin with? Politicians are owned by the banks, especially Goldman. Goldman saw a HUGE opportunity to make a killing in a moment of chaos, so they pull in their chits in Washington to get the politicians to vote for TARP (remember, the people hated this idea and it took several votes to make it 'look' like the politicians didn't want to vote for it, but 'had to' in order (according to the message from Paulson ) save 'the system'.
As for alternative, I would have let the thing collapse. So, we lose Goldman, AIG, B of A and Citibank...probably Merrill, but so what? The equity holders get wiped out, the bond holders get wiped out, the depositors move to viable banks, of which there are many. Even if we had to spend some money to support the deposit base, so what? We spent the money anyhow and didn't get anything for it except rescuing some already very wealthy individuals.
And most importantly in my thinking, the system would have been cleansed. The encumbrances which we still have today and which are holding back economic growth and job creation (who cares?) would be gone. I understand that is not how Washington works, but in a perfect world, wouldn't we be better off, or at least no worse off, and the people would have had at least some shot to survive the mess. As it is now, is this any chance? Did Paulson simply kick the can down the road? Only time will tell, but I believe he did.
And you are right: barely no-one even questions the veracity of what he did. History is on the verge of lauding him (and he either is a good actor, or truly believes that what he did was appropriate), when I believe the opposite ought to be true. That is quite a schism.
Basically if the rich go down they will take us all down with them eh. Paulson kept the rich from going down.
At the time this was going on, I was at an age, and point in my life, and I hope I am still there, in which, if the economy did collapse, and there was no saving the big banks, I really felt, I would have come out better and be on top instead of where I am.
Maybe that is just youthful enthusiasm, and fervor to go through anything that gets in my way, but I really do not think it would have been too bad for me anyways.
As for alternative, I would have let the thing collapse. So, we lose Goldman, AIG, B of A and Citibank...probably Merrill, but so what? The equity holders get wiped out, the bond holders get wiped out, the depositors move to viable banks, of which there are many. Even if we had to spend some money to support the deposit base, so what? We spent the money anyhow and didn't get anything for it except rescuing some already very wealthy individuals.
I wouldn't have allowed it to collapse, but I would have broken the companies you mention apart. At that point they were done and needed to be ended in a controlled manner. Instead the same people that broke them supposedly "fixed" them.
As chet points out, allowing them to collapse would have destroyed the markets. This isn't the early part of the 20th century, things are far more complex than they were then. However, we bailed out companies, not the nation.
Those companies still pose a threat. We have done next to nothing to make sure this doesn't happen again. Bank of America by many is considered a zombie bank, nobody knows for sure. Derivatives markets are back in full swing, still without any regulation or real oversight. Can't really have oversight when those doing the oversight all come from the big companies. Conflict of interest apparently doesn't register.
This being the economics forum (as opposed to the wretched "poltics and other controversies" forum...) I tend to make my judgement from the opinions offered by actual trained economists. There are plenty of left leaning economists in the many colleges that have a liberal bias, and no shortage of similarly aligned folks in the various think tanks / lobbying groups that line up for traditional "progressive" causes -- among these groups as well as the more conservative economists of traditional thought I have found no one that truly beleives the world would be better off if the global money center banks imploded. As I said the near universal scenario would have been one of roiling inflation and subsequent currency devaluation, chaos is not something to take lightly -- the violence and riots of the backwards zealots in the middle east who want to re-instate some sort of medival standards of religous rule are nobody I want to stand with.
The majority of indicators suggest the factors likely depressing economic growth in the US are a combination of inablity to deal with looming problems in Medicare, Social Security and other "entitlements", huge deficiets that seem impossible for either party to honestly address their role in growing, massive mismatch in skills between poorly educated products of ineffective public schools and the needs of employers in a global labor market, overly intrusive regulation / tax structure that encourages firms to leave profits earned abroad outside of productive use of US based firms, lingering distrust of the motivates and costs of taxes designed to support an even larger government bureaucracy that is buried inside the details of the Obamacare act, and going disatisfaction with the degree to which productive businesses are vilified by the media focused classwarfare demogauges in power.
Is there really any value in even trying to "break apart" the giant global money center banks? Would not any changes in tax codes or regulatory oversight really just suck up more productive resources to feed a more bloated and likely incompetent new layer of stupid governent overlords?
Might the best economic fix be to somehow hope that more efficient market forces will grow on their own to expose the "off balance sheet" horrors that the current crop of dishonest auditors have allowed? Perhaps the way forward is not to dwell on goofy paranoid theories of past conspiracies and instead rely more on one's own individual ability to better use the knowledge one can find to gain an edge over the poorly informed...
Last edited by chet everett; 09-13-2013 at 03:50 PM..
Basically for all the crys the loan to banks worked out well with 1.3billion profit to taxpayers. its the other since that are a real loss on bailouts and give aways in stimulus.Gone and on the credit card.
Uhh.. the actions of Paulson and others basically warded off another Depression. If anything his biggest mistake was not bailing out Lehman. The failure to backstop Lehman turned a painful credit crunch (probably something that would have been on par with the late 90s Asian crisis AT WORST) into the brink of a 2nd Depression.
Uhh.. the actions of Paulson and others basically warded off another Depression. If anything his biggest mistake was not bailing out Lehman. The failure to backstop Lehman turned a painful credit crunch (probably something that would have been on par with the late 90s Asian crisis AT WORST) into the brink of a 2nd Depression.
The actions warded off another depression; yes.
Doesn't mean it couldn't/shouldn't have been done differently.
The biggest problem is they have done nothing following up. Nothing has been changed to prevent it from happening again.
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