Posted on 11/21/2008 11:59:23 AM PST by WilliamReading
As bad a year as the stock market is having, Treasury Secretary Paulson is having an even worse one, according to William Black, Associate Professor of Economics and Law at the University of Missouri.
The professor, who was counsel to the Federal Home Loan Bank Board during the S&L Crisis and blew the whistle on the "Keating Five" in 1989, says Paulson deserves an "F-minus" for his role in the financial crisis.
"All of his policies made [the crisis] worse," says Black, citing Paulson's:
* Pushing for more deregulation of the securities and mortgage businesses. * Failure to recognize the liquidity crisis in credit markets sooner. * Failure to act to stop foreclosures sooner. * Opposition to the government taking equity stakes in financial institutions, until very late in the crisis.
"And he gets the worst grade because as head of Treasury he's also in charge of banking and thrift regulation," Black continues, noting he "destroyed" rather than beefed up supervision. "I hope you like the consequences."
Black, author of "The Best Way to Rob a Bank Is to Own One," says there's ample reasons why the financial markets have lost confidence in the Secretary.
He also notes Paulson steered Goldman Sachs into subprime and alt-A mortgage securities before becoming Treasury Secretary in 2006. Goldman began shorting those instruments shortly after Paulson's departure, he notes.
The current crisis is "not a hundred-year flood, that suggests it's an act of God caused by random forces," Black says. "This was one cause by bad policies, the same policies that have caused prior crises."
(Excerpt) Read more at finance.yahoo.com ...
A key component in this tangled story is deleveraging. Unfortunately, so much debt was built up in the good times that the deleveraging story has a long way to go. Between 1983 and 2007, the ratio of private credit to GDP in the Group of Seven large industrial economies plus China rose from 92pc to 155pc, according to a Nomura Securities calculation.
Good to see your giving Bush credit for winning the war
Given the headline (which I agree with), I was expecting something different. Instead, we have, almost verbatim, the criticism leveled not from the right, but from the Democrats. The article essentially says that Paulson should have done more of what he did wrong, and less of what little he did right. Not helpful.
“Paulson didn’t do enough”
“Paulson didn’t regulate that market fast enough”
“Paulson didn’t take the first steps toward federalization until blah”
“Paulson didn’t socialize my risk before I lost tons of money from blindly gambling all of my retirement egg, waaaaah”
“Paulson stalled on the national socialism, and now I am down 70%”
If it was *just* a crisis in confidence, then walking out for press conferences shaking in fear, with rhetorical apple juice spilled on your crotch, and suggesting all manner of drastic actions (some involving numbers Americans were NOT used to hearing in any context) probably wasn’t a good idea. If the problems are structural (i.e. a speculative real-estate tumor fueled by benevolent government free-money programs, which then ate through its containers and spread biohazardous waste through the rest of the susceptible, massively-leveraged economy), then even the proposed “solutions” (all of which involve extending the free-money programs in various novel forms - some more transparent than others) merely postpone the reckoning for another cycle - in a form more formidable than what is faced now. You can’t keep digging deeper, but some folks are always keen to suggest a larger shovel.
“Would love to see Hank Paulson start wearing cowboy boots to Wall Street as well.”
I think if he could get one in his size, a clown suit would be far more appropriate.
Paulson was at Goldman Sachs when he insisted that their leverage be increased 30 to 1. Thus they can lend $30 for every dollar they have in reserve.
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