Sure the financial markets have been a mess. But Paulson took such as reactive approach and, at times couldn’t make up his mind. That’s a bigger factor that messed the whole things up. Investors/employees at Bear, Lehman, Fannie or Freddie should all blame him!..
hank made the fatal mistake of taking that first step onto a slippery slope.
AlphaSeeker Wrote: ------------------------------------------------------- > Sure the financial markets have been a mess. > > But Paulson took such as reactive approach and, at > times couldn’t make up his mind. That’s a bigger > factor that messed the whole things up. > > Investors/employees at Bear, Lehman, Fannie or > Freddie should all blame him!.. These comments are insane! What did Paulson have to do with Bear’s failure? And was he to blame for the piss-poor management who applied 100:1 leverage at Freddie and Fannie? Look, the state of the financial system is certainly precarious right now, but the failure of these firms is on their terrible management teams, not a government official who is attempting to manage their demise in an orderly fashion.
Tobias, Paulson was indecisive from the get-go. On one hand, he made clear comments that institutions should be allowed to fail, which scared the craps of the markets; on the other hands, he engineered all these bailouts stuff, in a reactive measure. The disappointing market reaction showed that investors pretty wrote Paulson off. Whatever he says now is just hot air. For a respected GS Chairman/CEO and a Treasury Secretary for more than 2 years, this is a lousy record to end his career. Hank was trying to mock the successful rescue Rubin put together when Mexico has the crisis in the late 90s. Judging from the performance, Paulson is no Rubin. Quote from Obama: “Lipstick on a pig.”
Which bailouts are you suggesting he engineered that he shouldn’t have? Bear was planned by, and backed by the balance sheet of, the Fed. Blame Bernanke for opening the floodgates, not Paulson. Fannie and Freddie are Government-Sponsored entities. They had an implicit guarantee of being backed by the full faith and credit of the US Gov’t. Paulson had the right to put them into conservatorship and he did. If he did not take action, a whole host of problems would have been unleashed. Some examples that come to mind are the Chinese deciding to unload billions of dollars worth of Treasuries, a permanent reduction in liquidity in the mortgage market due to the absence of Freddie and Fannie, paired with an upward adjustment in the mortgage rate which would have made it much more difficult for Americans to obtain mortgages (as if it isn’t hard enough already!), and of course the long-term implications for our housing market, which might take several years to recover with no supply of mortgages for willing home buyers. If you are unhappy with Paulson’s actions with respect to the GSEs, imagine what might have happened if he didn’t act. Finally, on to Lehman. Paulson hasn’t acted, and he has said that he won’t act with any public funds. This is the right decision and the one Bernanke should have made with respect to Bear. He should be (and reportedly is) doing everything he can to arrange a private sector solution, but if a solution does not materialize, Lehman is not too big to fail. Neither was Bear. The GSEs are, whether you like it or not. I think when we all look back on this episode in financial history, we will consider Paulson to be one of the heros, not one of the goats like Greenspan and Bernanke.
Hero? Which of his measures has succeded? I didn’t say Paulson should not take the bailout actions. What I said is that his bailouts are reactionary and in many ways contrary to his public statements of “institutions should be allowed to fail”. He has been indecisive, Indecision creates uncertainty, uncertainty destroys market confidence. What a losing record as treasury secretary…