IPOD
RADIO
Paulson: Total Fuck Up
TUESDAY OCTOBER 14 2008 9:30 PM
Submitted by FearTheReaper. Edited By nicole_powers.
TAGS: Henry Paulson, Goldman Sachs, Bush Administration
I can’t figure out most of what the fuck is going on with this crisis, because no one really knows how bad it is and Republicans are trying to blame black people. Although, Republicans try to blame black people for everything, so it should be expected. One thing that seems to be definite is that Henry Paulson is a fucking idiot who dropped the ball.
Oh, it seems like just three weeks ago that Paulson told us the world was going to end unless we did exactly what he wanted. Way back in late September, Paulson rejected a “equity injection” plan, which was basically a plan to partially nationalize banks. Many, many economists believed it was the best way to loosen up the credit market. But Hank no likey. Why?
Well, he’s part of the Bush Administration, so you can be certain he will do the wrong thing first. In this case, everything private is awesome and anything public is bad. The market knows what is best and they will sort itself out, blah, blah, blah... “Can we have 700 billion dollars?” The private enterprise is God slogan is what got us into the mess in the first place, but they wanted to keep on keeping on, which didn’t allow for many bailout options.
And of course, if we are talking about the Bush Administration, cronyism and protecting your pals comes first. The Paulson bailout was no different. Paulson began working for a little outfit called Goldman Sachs in 1974. In 1982 he became a partner, followed by Chief Operating Officer in 1994 and finally, CEO in 1998. In 2006, he became Secretary of the Treasury. Since the beginning of this crisis he has done everything possible to make sure his old company, Goldman Sachs, was protected and even made some dough.
First up, he allowed one of Goldman Sachs main competitors to fail. Lehman Brothers was allowed to collapse, because, well, the market has to correct itself and, uh, um…it just was. Deal with it. One week later, the government, in exchange for equity, saved AIG. Please don’t pay attention to the fact that AIG owed Goldman Sachs around $20 billion. And ignore the fact that a Goldman Sachs man was in the room when the AIG bailout was being negotiated.
One of the Wall Street chief executives participating in the meeting was Lloyd C. Blankfein of Goldman Sachs, Mr. Paulson’s former firm. Mr. Blankfein had particular reason for concern.
Although it was not widely known, Goldman, a Wall Street stalwart that had seemed immune to its rivals’ woes, was A.I.G.’s largest trading partner, according to six people close to the insurer who requested anonymity because of confidentiality agreements. A collapse of the insurer threatened to leave a hole of as much as $20 billion in Goldman’s side, several of these people said.
After the collapse of Lehman, Goldman Sachs was one of only two big investment banks left and people started freaking out, thinking it might be going down too. They started shorting Goldman stock, so Paulson made sure to ban all short selling. Well, that didn’t work – for complicated reasons someone with an amazing artist’s brain, like myself, doesn’t understand. Paulson lifted the ban because it was obviously a bad move and kept asking for $700 billion to buy “toxic assets.” But the explanation of exactly how that would fix the crisis was never clear and was never accepted by most economists. They wanted an equity injection.
Paulson didn't.
Some said we should just stick capital in the banks, take preferred stock in the banks. That’s what you do when you have failure. This is about success.
Success! Oh, and because an equity injection would cause the value of shares in a company like Goldman Sachs to be diluted. Goldman Sachs would have to issue preferred shares to get the government cash. They’d actually have to take a hit and suffer a bit because of their reckless behavior. Not what Hank wanted. He fucked around for a couple of weeks, as stock markets turned to shit and credit froze. With each passing day, the problem actually became more expensive to fix.
In a climate of fear, Congress passed something very similar to what Paulson wanted. And yet, our economy continued to spiral down the toilet. Something different was obviously needed. I wonder what it could be?
Over the weekend, Hank met with other G-7 leaders to figure out how to stop the bleeding. Apparently, they couldn’t agree on a plan. It seems someone still wanted the free market to save them.
It’s written in code — and that’s a bad thing. For example, that phrase about “Ensure that our banks and other major financial intermediaries, as needed, can raise capital from public as well as private sources” sounds to me as if there was some tense negotiation over language that two warring parties could live with — one (presumably the Brits) wanting a British-type recapitalization, the other (Paulson?) still hoping that the Warren Buffetts and Saudi princes of the world will come in and save the day. That’s not at all a good sign — and anyway, will investors be able to crack the code, or will they just see that the G7 statement was vague, and panic further?
The British took the lead with partial nationalization and Europe followed.
European financial and political leaders agreed late Sunday to a plan that would inject billions of euros into their banks in a bid to restore confidence to the teetering financial system.
Taking their cue from a rescue plan announced last week by Britain, the European countries led by Germany and France pledged to take equity stakes in distressed banks and vowed to guarantee bank lending for periods up to five years.
Hmmm. After fucking around for three weeks, doing all he could to help his pals and attempting to jam through his already pathetically eviscerated free market bullshit, Paulson came around.
Two weeks after persuading Congress to let it spend $700 billion to buy distressed securities tied to mortgages, the Bush administration has put that idea aside in favor of a new approach that would have the government inject capital directly into the nation’s banks — in effect, partially nationalizing the industry.
Hey, welcome to the party, you stupid fucks.
The Treasury Department’s surprising turnaround on the issue of buying stock in banks, which has now become its primary focus, has raised questions about whether the administration squandered valuable time in trying to sell Congress on a plan that officials had failed to think through in advance.
It has also raised questions about whether the administration’s deep philosophical aversion to government ownership in private companies hindered its ability to look at all options for stabilizing the markets.
Some experts also contend that Treasury’s decision last month to not use taxpayer money to save Lehman Brothers worsened the panic that quickly metastasized into an international crisis.
You don’t say. How much do you want to bet if the first name on the line had been Goldman Sachs, we wouldn’t be having this debate? More epic failure brought to you by the idiots in the Bush Administration.
FearTheReaper is a writer, actor and stand up comedian. Check back each Tuesday, Thursday and Saturday for more from FearTheReaper and read his blog, Stop All Monsters.
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