Hank Paulson was on Charlie Rose this week. I disagree with so much of what he said, I don’t know where to start. So I’ll just take a few of the most objectionable statements:
Well, Charlie, the risk was a huge one, because if the system had collapsed, it would have been catastrophic for the economy.
This is a common refrain among the trifecta of self-styled saviors: Bernanke, Geithner, and Paulson. Not unlike their approach to regulating prior to the collapse, it is a very short-term view. We “saved” the system, and now we have a disaffected populace, ten-percent unemployment, and the same old rickety financial house inhabited by greedy superbanks. Not to mention that we endured a series of injustices that can only be called un-American. Has Paulson considered that maybe the system needed to be remade, and a “collapse” was the surest way to do it?
And so most of what is cited as mistakes were really things we had no control over. For instance, I would like to have seen the AIG problem coming earlier. But there was no regulator that had responsibility for the whole institution, and we just didn’t have a clear line of sight, and we didn’t — we didn’t have the information.
Paulson talks as if he were installed in mid-2008. The man became Treasury Secretary on July 10, 2006. If he didn’t have the information to detect a financial collapse or the authority to avert one, it’s because he didn’t ask for it. The Treasury’s own web site describes the Secretary’s job as “the principal economic advisor to the President” who “plays a critical role in policy-making by bringing an economic and government financial policy perspective.” Would that not include ensuring that the government can avert an economic disaster? This is just one instance of many where Paulson passes the buck. I can’t help but think that the average American worker would be fired if he did the same.
On the “Volcker rule,” which, in the spirit of Glass-Steagall, would prevent depositories (“commercial banks”) from trading for their own gain:
I’m not at one on that. . . . the idea of having sound bites and going up to Congress and legislating it, I would let the systemic regulator and the prudential regulator worry about that, and I would let them deal with it.
Given the laxity of the SEC and other regulators leading up to the crisis, this statement — which, let’s recognize, is being uttered by a former Chairman and CEO of Goldman, Sachs — can only be read as naive, self-serving, or just plain stupid.
We need compensation plans to be structured so they don’t promote excessive risk-taking.
This contradicts Paulson’s earlier statement that “we need to have a system again going forward where no bank or financial institution is too big to fail so we don’t to put taxpayer money in.” Which one is it, Hank? Do we limit the size of banks and let them fail, or limit the level of risk and let them grow? This is such a fundamental question that you’d think Paulson would have a coherent idea or at least a consistent theory buttressing his answers. But he doesn’t. And that’s just more evidence of the intellectual laziness that dragged Hank Paulson into the muck — and took us all with him.
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