Dow Jones colleague Michael Crittenden has reported what ex-Treasury Secretary Henry “Hank” Paulson will say tomorrow in prepared remarks before a Congressional hearing. A lovely scoop. It’s worth having a look at the full text of Paulson’s prepared remarks on WSJ.com. You’ll see that Paulson adds little to our understanding of that “snarky bit of business in which the Fed and the Treasury were complicit, Mr. Lewis a slippery accomplice and the shareholders left holding the bag,” as Alan Abelson of Barron’s recently put it. In addition to shareholders, taxpayers were left holding a very burdensome bag as our esteemed leaders dug into their – er, our – pockets and forked out a chunk of money to prop up a very sick Merrill Lynch which Bank of America’s boss Ken Lewis had agreed to buy three months earlier without sufficient due diligence as to Merrill’s true financial health (or lack thereof.) Economic historians will forever debate the wisdom of the Bernanke-Paulson decision to push the BofA-Merrill deal through in December by threatening to topple the bank’s management (stick) and agreeing to pony up many billions of federal aid dollars (carrot.) But will historians ever figure out why why Merrill Lynch (and AIG) got saved but not Lehman or even Bear Stearns? “Our own guess is that the answer at the very least might reveal how haphazard the decisions were,” Abelson, musing about this very question, wrote in Barron’s. Indeed. Our leaders were scrambling and improvising and letting personal biases affect their decisions. (Paulson of course is a Goldman Sachs alumni, a veteran of the investment banking world. Who knows where his heart diverged from his head on matters of financial industry allegiance.) To segue into the Sonia Sotomayor hearings this week (stay with me, please): It’s utter foolishness to pretend that one’s life story doesn’t have a bearing on one’s professional decisions. As hard as one tries to be neutral, objectivity is impossible. That our political leaders have effectively forced Sotomayor to deny that her experience and background don’t tinge her judicial actions is yet another example of the farce our Congress has become.
6 Comments to Hank Paulson’s Self-Defense
The methodology for Obama & his minions – Paulson, Bernanke, Congress, the unions, et al, is Chicago Mob. The ideology is 1930’s Chicago Marxism. Welcome to the OLD WORLD.
pyeeJuly 15, 2009
Goldman Sachs Group’s massive profits that were just announced shows just how Hanky-Panky Paulson was able to pass on all of Goldman’s risky losses on to the taxpayer. Goldman bought “insurance” from AIG to cover these securitized debt obligations. Instead of letting AIG go belly up because they could not cover these losses, Paulson made good on these Las Vegas style bets by having the US Treasury pay Goldman through AIG.
Now that Goldman Sachs Group, the patient, is well again, they need to reimburse AIG, so that AIG can pay back what is owed to the US Treasury. Currently, AIG owes the gov’t about $180,000,000,000.00. If Goldman and the other TARP banks don’t repay AIG, AIG will never be able to repay the government through ordinary
income, no matter how many buildings and assets it sells.
citizen and taxpayerJuly 16, 2009
Objectivity is not easy but is most certainly possible. Denial of this is an acceptance of corrupt government. I do not acccept that.
heronghJuly 17, 2009
What I’m getting from all of this is that AIG was saved in great part to save Goldman Sacks.
Perhaps influence peddling we call corruption in Asian governments is nearly equally at home in the Western developed countries. Only the format is different.
Robert GuinaughJuly 17, 2009
Ms. Stern’s comments in “Hank Paulson’s Self-Defense,” are spot on from what I’ve read in other accounts of the stick and carrot approach used by Paulson and Bernake to pressure B of A’s Ken Lewis to make the Merrill Lynch purchase go through. What I continue to be baffled by is that no Senate investigation has been initiated. It took $20 billion dollars (taxpayer funds)to cover the Merrill Lynch acquisition and no one seems to be outraged by this? If this duplicity is nothing less than collusion on the part of federal officials to fund a sweetheart arrangement to bail out one investment firm versus another, I don’t know what is collusion. The federal government has chosen sides in what has been up to now a free market where healthy companies survive and unhealthy companies fail. Using tens of billions of taxpayer dollars to provide financial advantage to select businesses versus their competitors. This cannot continue. The American people do not support any of this.
July 15, 2009
With regards to the due diligence, Mr. Lewis had a valuation done by Mr. Flowers. Perhaps he too should be in included in this. He was paid some number of millions for his opinion.