leistb
01-02-2009, 10:08 PM
Get The Rubber Room Ready - Paulson (http://market-ticker.denninger.net/archives/706-Get-The-Rubber-Room-Ready-Paulson.html)
I'm not even sure I believe this came out of Paulson's mouth (http://www.ft.com/cms/s/0/ff671f66-d838-11dd-bcc0-000077b07658.html):
Global economic imbalances helped to foster the credit crisis by pushing down global interest rates and driving investors toward riskier assets, outgoing US Treasury Secretary Hank Paulson told the Financial Times.
Really?
Global economic imbalances?
But Mr. Paulson, didn't those "global economic imbalances" take place over a couple of dozen years? I seem to recall that China has been making cheap crap for The United States for a very long time, and it has not just been in the last couple of years that it turned into a problem, right?
Hmmmm.
“Excesses . . . built up for a long time, [with] investors looking for yield, mis-pricing risk,” he said. “It could take different forms. For some of the European banks it was eastern Europe. Spain and the UK were much more like the US with housing being the biggest bubble. With Japan it may be banks continuing to invest in equities.”
This argument – already advanced by a number of economists and largely endorsed by Federal Reserve chairman Ben Bernanke – suggests that the roots of the crisis do not simply lie in failures within the financial system."
Investors mis-priced risk?
Or did you mis-price risk Henry? Perhaps on purpose?
Why would your company, for example, short something it was selling to investors unless it thought it was overpriced?
Now there's nothing wrong with shorting a stock or bond, of course. Its the expression of an opinion that the price is too high. You believe it will decline in value, so you short it.
Except for one problem - in this case you were one peddling the stuff you were shorting!
So on the one hand we have you telling your customers that this is "Grade AAA mortgage paper", and on the other hand your firm was shorting that very same paper, implying rather strongly that you thought your customers were paying too much for it.
Oh, you didn't tell them that either, did you? That's what I thought.
Now let's talk about what else happened Mr. Paulson.
In 2000 you do recall that you went to the SEC and Congress to request that the leverage limits that bound Goldman Sachs (your company) and the other investment banks be removed, right?
You also remember that in 2004, following that failed attempt, you tried again, and this time your request was granted, right?
You do recall that every one of the failed firms - Lehman, Bear, Fannie, Freddie and AIG - all had leverage more than double that of the previous limits when they blew up, right?
Again, you said:
Spain and the UK were much more like the US with housing being the biggest bubble.
Yes Mr. Paulson, and what do you need to create a speculative investment bubble?
Why you need lots of credit - that is, debt, right?
And how do you get lots of credit Mr. Paulson?
Why you increase your leverage. And when 14:1 isn't enough, you go to Congress and the SEC and ask them to remove the "shackles" so that your "finely tuned risk models" can take on more leverage - that is more debt, which is a necessary condition to grow such a bubble.
So now we get to the bottom of this entire charade by your own admission, which is that you personally were largely responsible for the mess we find ourselves in.
But that's not all! We also have the following statements from you that constitute lots of claims that there is no mess:
May 2007: "We think it is near the bottom. It will take a while to work its way through (the system). Fortunately for us, we have a very diverse, healthy economy. ..... housing will be contained......
August 2007, in Beijing: "There's a wake-up call and there's an adjustment to the repricing of risk, but I see the underlying economy as being very healthy."
October, 2007, on HOPE NOW: "This is a 100 percent market-based solution. I believe in markets." You added: "I've seen turbulence in the market a number of times and I can't think of any situation where the backdrop of the global economy was a healthy as it is today."
March 2008: "The worst is likely to be behind us." (In reference to Bear Stearns going under.)
July 2008: Your famous "Bazooka" quote, and not needing to use it, and less than a month later, in late August, you said "We have no plans to insert money into either of those two institutions."
September 2008: (Two weeks later!) $200 billion is committed by Treasury to Fannie and Freddie.
September 15th 2008: You congratulated yourself (and Treasury) for not rescuing Lehman - but the very next day you committed the taxpayer to an eighty five billion dollars rescue for AIG, and less than 72 hours after that you threatened martial law and a total collapse of the entire financial system if you were not given $700 billion more to spend in any way your heart desired.
Now with just three weeks before you will leave office in disgrace you say that it never was contained and that this was born out of "global imbalances" that were years in coming.
Years during which you personally were head of a firm that shorted the very securities that blew up and caused the mess, while marketing them to investors, and in addition you personally lobbied Congress and the SEC to permit your firm and the rest of Wall Street to increase their leverage - a move that was directly responsible for the failure of each and every one of the firms that has blown up and created the mess.
I want to know what you're smoking and where you got it, because its damn good stuff.
And as for "containment", my recommendation is a nice Federal Prison - 50 years worth should be about right - we'll keep the bones on display as a warning to future similar malodorous slime if you aren't breathing for the duration.
http://market-ticker.denninger.net/
I'm not even sure I believe this came out of Paulson's mouth (http://www.ft.com/cms/s/0/ff671f66-d838-11dd-bcc0-000077b07658.html):
Global economic imbalances helped to foster the credit crisis by pushing down global interest rates and driving investors toward riskier assets, outgoing US Treasury Secretary Hank Paulson told the Financial Times.
Really?
Global economic imbalances?
But Mr. Paulson, didn't those "global economic imbalances" take place over a couple of dozen years? I seem to recall that China has been making cheap crap for The United States for a very long time, and it has not just been in the last couple of years that it turned into a problem, right?
Hmmmm.
“Excesses . . . built up for a long time, [with] investors looking for yield, mis-pricing risk,” he said. “It could take different forms. For some of the European banks it was eastern Europe. Spain and the UK were much more like the US with housing being the biggest bubble. With Japan it may be banks continuing to invest in equities.”
This argument – already advanced by a number of economists and largely endorsed by Federal Reserve chairman Ben Bernanke – suggests that the roots of the crisis do not simply lie in failures within the financial system."
Investors mis-priced risk?
Or did you mis-price risk Henry? Perhaps on purpose?
Why would your company, for example, short something it was selling to investors unless it thought it was overpriced?
Now there's nothing wrong with shorting a stock or bond, of course. Its the expression of an opinion that the price is too high. You believe it will decline in value, so you short it.
Except for one problem - in this case you were one peddling the stuff you were shorting!
So on the one hand we have you telling your customers that this is "Grade AAA mortgage paper", and on the other hand your firm was shorting that very same paper, implying rather strongly that you thought your customers were paying too much for it.
Oh, you didn't tell them that either, did you? That's what I thought.
Now let's talk about what else happened Mr. Paulson.
In 2000 you do recall that you went to the SEC and Congress to request that the leverage limits that bound Goldman Sachs (your company) and the other investment banks be removed, right?
You also remember that in 2004, following that failed attempt, you tried again, and this time your request was granted, right?
You do recall that every one of the failed firms - Lehman, Bear, Fannie, Freddie and AIG - all had leverage more than double that of the previous limits when they blew up, right?
Again, you said:
Spain and the UK were much more like the US with housing being the biggest bubble.
Yes Mr. Paulson, and what do you need to create a speculative investment bubble?
Why you need lots of credit - that is, debt, right?
And how do you get lots of credit Mr. Paulson?
Why you increase your leverage. And when 14:1 isn't enough, you go to Congress and the SEC and ask them to remove the "shackles" so that your "finely tuned risk models" can take on more leverage - that is more debt, which is a necessary condition to grow such a bubble.
So now we get to the bottom of this entire charade by your own admission, which is that you personally were largely responsible for the mess we find ourselves in.
But that's not all! We also have the following statements from you that constitute lots of claims that there is no mess:
May 2007: "We think it is near the bottom. It will take a while to work its way through (the system). Fortunately for us, we have a very diverse, healthy economy. ..... housing will be contained......
August 2007, in Beijing: "There's a wake-up call and there's an adjustment to the repricing of risk, but I see the underlying economy as being very healthy."
October, 2007, on HOPE NOW: "This is a 100 percent market-based solution. I believe in markets." You added: "I've seen turbulence in the market a number of times and I can't think of any situation where the backdrop of the global economy was a healthy as it is today."
March 2008: "The worst is likely to be behind us." (In reference to Bear Stearns going under.)
July 2008: Your famous "Bazooka" quote, and not needing to use it, and less than a month later, in late August, you said "We have no plans to insert money into either of those two institutions."
September 2008: (Two weeks later!) $200 billion is committed by Treasury to Fannie and Freddie.
September 15th 2008: You congratulated yourself (and Treasury) for not rescuing Lehman - but the very next day you committed the taxpayer to an eighty five billion dollars rescue for AIG, and less than 72 hours after that you threatened martial law and a total collapse of the entire financial system if you were not given $700 billion more to spend in any way your heart desired.
Now with just three weeks before you will leave office in disgrace you say that it never was contained and that this was born out of "global imbalances" that were years in coming.
Years during which you personally were head of a firm that shorted the very securities that blew up and caused the mess, while marketing them to investors, and in addition you personally lobbied Congress and the SEC to permit your firm and the rest of Wall Street to increase their leverage - a move that was directly responsible for the failure of each and every one of the firms that has blown up and created the mess.
I want to know what you're smoking and where you got it, because its damn good stuff.
And as for "containment", my recommendation is a nice Federal Prison - 50 years worth should be about right - we'll keep the bones on display as a warning to future similar malodorous slime if you aren't breathing for the duration.
http://market-ticker.denninger.net/