By Simon Johnson
If you’ve read, are reading, or plan to read Andrew Ross Sorkin’s Too Big To Fail, you also need to pick up a copy of Hank Paulson’s memoir, On The Brink. Sorkin has the bankers’ story, in sordid yet compelling detail, of how they received the most generous bailout in the world financial history during fall 2008 – and set us up for great problems to come. Paulson tells us why, when, and how exactly he let them get away with this.
Hank Paulson does not, of course, intend to be candid. As I review in detail on The New Republic’s The Book site this morning, On The Brink is actually a masterpiece of misdirection and disinformation.
But still, he gives it all away – and if any details remain obscure, check them in Sorkin. Paulson honestly believes that the financial sector as constructed is productive, makes sense, and should continue to operate in roughly its current form.
Whether or not Paulson really understands the functioning of big banks in the US today is an interesting question – for example he never mentions how they treated customers during the boom, and there is not one word about the need for greater consumer protection moving forward. On the other hand, perhaps this omission tells us that he understands the game all too well – and is keen for it to continue.
He certainly did his best to make that happen.
The Baseline Scenario 
Or could it be that he saved money market funds ’cause he had $500 mil sitting in there?
“Paulson honestly believes that the financial sector as constructed is productive, makes sense, and should continue to operate in roughly its current form.”
What else should we expect from the man who repeatedly tried and eventually convinced the SEC to obliterate the net capital rules? Then he lets his alma mater’s competitors die at the hands of the leverage gun he handed them while saving his buddies. That specious jackass is truly one of the worlds all-time slime balls.
Plus he wants $29 for this “memoir”? Talk about robbing the public twice.
Paulson and his gangsters conned two presidents,the House and the Senate..and saved his homebank and his
wealth.He should be indicted for fraud and looting, along with Tim ‘The Rigger’.
The banking system itself is a rip-off, a privitazation of powers that rightly belong to the public. As long as the banks make money by creating money, the incentive is to create as much money as possible for whatever reasons possible, whether the money is used for productive purposes or not. Credit crises are built into the DNA of fractional reserve banking. Maybe Paulson’s not so crazy after all; you can only break such a system or save it. There is no “reform” that will make it work.
“Paulson portrays himself as the thoughtful Wall Street insider who knew—somehow—that a crisis was coming” – if so, why did Paulson frantically go to Congress, begging on his knees to Nancy Pelosi, making the rounds on the punditary talk shows, etc. – right there on national television.
“(He keeps no notes and never uses email—this is a smart guy.)” – that’s hard to believe, never using emails (perhaps technical support showed Paulson how to purge material evidence off the computer hard-drive). But there are the phone records.
“In his mind, no one was really to blame, and (almost) everyone could and would be saved, and at no cost to them—and never mind what that meant to taxpayers and ordinary citizens.” Is this just another example of why ordinary people end up cynical, jaded, and digusted with Government.
“And there is still a chance to save his reputation—that is what this book is all about–with a sophisticated web of misdirection.” – Exactly. When Obama’s memoirs to come out after 2012 or 2016, will he shed any further light on the crisis, probably not.
“Paulson wants to convince you that, once he became secretary of the treasury, he worked hard to head off the growing crisis and prepared for it as much as possible. This is exceedingly hard to believe.” Unfortunately the current Administration probably feels the same way. Just like Paulson, President Obama and his economic team repeat their talking points (with the media) of having no choice but to save our financial institutions and admitting to a few mistakes that were made in the process of maintaining stability.
“On the Brink turns out to be an interesting and important book, but not at all for the reasons its author thinks.” An excellent point.
“It is really a memoir of modern American power, an account of how we messed up and how our so-called leaders put it all back together…” Another excellent point (although, I would substitute “we messed up” with “they messed up”).
No, the publisher wants $29. And unlike the bailouts, you have the choice to give your money or not.
Paulson “is taking no advance and will donate all profits to the non-profit Homeownership Preservation Foundation, which helps families in danger of foreclosure.”
It’s weird that he got no advance, but the typical royalty rate is 10-15%. (That doesn’t mean the greedy publisher keeps the rest, they have to cover costs of printing, advertising, editing, etc.)
http://mhpbooks.com/mobylives/?p=4807
Re Paulson: “even in troubled middle-income countries, such as South Korea, Turkey, Argentina, or even Russia, it is extraordinary to keep management in place when providing such support. ”
Considering the competence and orientation of the Bush regime, it’s not surprising that something like the financial crisis happened.
Considering the simpering stupidity of the American media, it’s not suprising that prominent “journalists” like David Brooks exist and were touting Paulson and Geithner as heroes coming to the rescue.
The real disturbing symptom of where we are in the US, is that a relatively new politican, largely from outside the system, fresh into the Presidency, would wind up saving the looters and keeping them in place so that they can continue corrupting and grinding the system down day-to-day, and keep the promise of ever greater debacles in the future, well secure.
“(He keeps no notes and never uses email—this is a smart guy.)”
Ha! I recall a 60 Minutes piece on a crook businessman, who had managed all his deals according to his credo: “I never sign anything.”
So my first reaction is much different (more skeptical) from Simon’s conclusion of a “smart guy.” I would have at a minimum have said, “–this is a shrewd guy,” while thinking “–this is the kind of person who approaches his job in a way where he feels it necessary to wear gloves to hide his fingerprints.”
Paulson was an Eagle scout. Are you impugning Eagle Scouts? If not, you should.
So what’s he up to these days? Happily puttering away at the World Wildlife Fund or the Nature Conservancy?
That, or Congress and two Presidents were not conned. They were informed of the possibility put forward by Paulson and thought it was great.
How one thinks about the issue of two branches of the U.S. Government being “conned” by one one man says a lot about how one thinks about our government in general.
I, for one, think most members of the government went into the Paulson deal with eyes wide open and secretly applaud the results so far.
Well, if he really wanted to appear altruistic, he’d spare us the insulting pretense of a face-saving account of the past two years and donate the $100 million in taxes he saved when he sold his GS shares to become Treasury Secretary. That’s far more than that drivel he wrote will ever earn in donations and infinitely more appropo, considering so much of the money he received at GS was ultimately at the expense of so many homeowners facing foreclosure.
I have no candle to hold for Paulson, but I did watch theseemingly endless hearings at the Senate and House on Bloomberg TV.
The impression I had through his hoarse voice and media unfriendly style -compared the smooth snake oil charms of Geithner was a man who had suddenly realised just what an unholy mess this was. I think he was dead meat because of his background but there was a WINDOW at which if it had been rapidly pased and a follow up plan enacted that the infamous TARP could have arrested the market’s fall long enough for this injection of liquidity to be effective. Then it nede all the rest-real stress tests, the firings and the bankruptcies to have happened. It could have creatd space but the Administration blew it, IMO. Whilst this was going on the Brits were still fiddling like Nero, so no plaudits here either. There is therefore one small jot of sympathy with a man suddenly looking in the mirror- post hoc it will be as ever all self-justification. I can think of better ways to spend $29
Does one have to remind, just for the sake of objectivity, about his spiel of ‘imminent threat of martial law’, and that his first ‘plan’ was voted against ? An interesting read: The Financial coup:
Consolidation of America’s Economic Elite
http://www.globalresearch.ca/index.php?context=va&aid=17742
It is a refreshing to read this review of Paulson after seeing the sickening whitewash in the Economist a few weeks ago.
Indubitably.
Until the Fed is abolished & replaced with an independent, total economy focused body of economists & business men (no banksters) approved by the senate & 49 more state banks, everything else is meaningless esoteric crap. All we’re doing is nibbling around the edges of a gigantic problem.
Hey, that’s a savings of $6 over the usual fee. ;)
A start on Fed –
http://www.huffingtonpost.com/2010/03/10/leading-senator-wants-new_n_493596.html
I think it very telling that in the afterword to the book, Paulson opines that there are too many banks in the U.S. and that we need more consolidation into larger institutions. And that these bigger banks will be a boon to us because they will provide their products at lower costs than small banks–I guess just like the big banks now have lower fees and pay higher rates than small banks.
> he understands the game all too well
Goldman is one of the biggest winners of the financial crisis. If you know you are the de facto winner on the gambling table, why would you want to change the system? You would keep the game go on until there is either no one else to gamble with, or the casino closes the shop. The casino won’t close since the federal government will take all the losses one way or the other as long as the people don’t revolt against it. So far I rarely heard people criticizing that the federal government was dead wrong. So… the natural extrapolation is – keep the game going…
> The banking system itself is a rip-off, a
> privitazation of powers that rightly belong to
> the public
Let’s suppose I start a bank with a million dollars of my hard-earned money. I would expect to be able to run my banking business like I might run any other business that I started with this money.
So .. why does my money all of a sudden “rightly belong to the public”, or the decisions I make become subject to “public” control more than my own?
(If you want to answer by introducing FDIC insurance to offset my use of “fractional reserve banking” .. then please include this in your answer. But if you do .. please explain how the “public” knows more than professional bankers, as to how to run this business.)
Because you don’t lend out the million dollars; that’s just your reserve. You lend out 10 million in credits you create ex nihilo. Your charter gives you the power to create money. But that should be a public power, not a private one.
So, let’s get this straight: HP raided the Treasury through Congress to bail out all of his best friends (and himself), and now has written his own account of the bravery and wit used to forestall a personal calamity that would have broken him and alienated him from all of this best buds. This book cannot possibly be worth the paper it’s written on, or even the ink to print one word of it. He ranks high on my list of the most treasonous Americans in all of history. He is scum, filth, the lowest of the low, son of Satan, Lord of all that is dark and despicable. And that’s just eh positive stuff.
My review of Paulson’s book is at
http://seekingalpha.com/article/189714-in-defense-of-paulson-s-golden-boys
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Aside from indignation at the treacherous arrogance of Paulson, there is one point that seems more feasible than the rest. Like a historic ringleader of a global robbery, Paulson needs a coherent alibi to frame all of the actions. He needs this to be in an alignment with all the players. Paulson can not possible believe that his book is going to be received as authentic history. It does, however, conspire to a storyline that provides a seamless (even if obvious) scenario for all the coconspirators to lock onto and follow. Stick to the storyline…boys; don’t stray. Noone can prove anything if we all stick to the same story. The criminal genius of this action is that he is actually paid to do it. In other words, Paulson is drawing an “accountable” bottom line to his actions that provide the answers and tlking points of decision making as he wants it to be perceived.
160 Billion in Banker bonuses in 2009, versus 1600 Billion in total US corporate profit in 2007, a “good” year. A free market at work? or a corrupt opaque overly complex with no redeeming benefits multiple book/off book financial money printing oligarchy?
Paulson and his son are pandering away for public subsidies for their soccer team and minor league baseball team from the ______ _______ leaders of Portland and Beaverton Oregon.
……couldn’t have said it better myself !