How Hank Paulson's Inaction Helped Goldman Sachs - McClatchy

[WillyT]

How Hank Paulson's inaction helped Goldman Sachs
By Greg Gordon | McClatchy Newspapers
Posted on Sunday, October 10, 2010

<snip>

WASHINGTON — Henry Paulson has received widespread acclaim for his bare-knuckled decision-making as the treasury secretary at the peak of the 2008 financial crisis, but former federal regulators say he missed multiple chances to contain the disaster. Among the prime beneficiaries of Paulson's inaction in 2006 and 2007 was Goldman Sachs, the investment banking behemoth he ran before he was named to former President George W. Bush's Cabinet.

Paulson's failure to take steps to curb risky mortgage lending also enabled top executives of other Wall Street firms to continue cashing big bonus checks, while less privileged Americans lost their jobs, their homes and their retirement savings in the worst economic catastrophe since the Great Depression.

Paulson and Federal Reserve Chairman Ben Bernanke have been widely praised for engineering the Wall Street bailouts, which avoided systemic chaos, and they'll probably get more plaudits if the government recovers much of the $400 billion in loans it made to financial institutions.

However, while Paulson has been criticized, unfairly or not, because $12.9 billion of the bailout money went to Goldman, he's drawn little scrutiny for what he did in his first 18 months in office, during the final frenzied stages of the housing bubble. In his eight years as Goldman's chief executive, Paulson had presided over the firm's plunge into the business of buying up subprime mortgages to marginal borrowers and then repackaging them into securities, overseeing the firm's huge positions in what became a fraud-infested market.

During Paulson's first 15 months as the treasury secretary and chief presidential economic adviser, Goldman unloaded more than $30 billion in dicey residential mortgage securities to pension funds, foreign banks and other investors and became the only major Wall Street firm to dramatically cut its losses and exit the housing market safely. Goldman also racked up billions of dollars in profits by secretly betting on a downturn in home mortgage securities.

"No one was better positioned . . . than Mr. Paulson to understand exactly what the implications of his moving against the (housing) bubble would have been for Goldman Sachs, because he knew what the Goldman Sachs positions were," said William Black, a former senior thrift regulator who delivered the harshest criticism of the former secretary.

Paulson "knew that if he acted the way he should, that would have burst the bubble. Then Goldman Sachs would have been left with a very substantial loss, and that would have been the end of bonuses at Goldman Sachs."

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More: http://www.mcclatchydc.com/2010/10/10/101753/inaction-by-treasurys-paulson.html

:kick:

[Greyhound]

1. K&R for more of that "change".

:rofl:
:kick: & R

[indepat]

2. Surely Paulson's inaction was not indicative of a mammoth conflict

being resolved in favor Goldman Sachs rather than performing the duties required by his oath of office. Surely not. Heavens forbid. ;)

[riderinthestorm]

3. Who could've imagined that Hank Paulson might have a massive conflict of interest

and might have gamed the financial system as Treasury Secretary to save his (and his friends') financial ass....

Gee, nobody saw THIS coming. :eyes:

Sigh. This kind of news of insider manipulation just makes me so tired. And of course Paulson's still there "guiding" Obama (cough). I honestly can't see a way out of the rapid slide into full-on oligarchy that the US appears to be in the final stages. Is there anyone out there powerful enough to begin a reversal of this? The amount of $$ the guys at the top are amassing makes me believe it's impossible for the average American to catch a break again, ever.

A sad K & R.

[nashville_brook]

4. k and r

[ThomCat]

5. Yet more indication that Goldman is using the goverment

to guarantee their own ongoing massive profits. Where ever they can use their conflicts of interest, they do. They have. And I'm sure they continue to do so. As we have all heard the saying go,

"The best indicator of future performance is past performance"

And the past performance of these high level manipulators and leaches from Goldman Sachs is clear. :grr: