Wednesday, September 9, 2009

So What Was the Bank Bailout Really All About?

In the October issue of Vanity Fair reporters, Donald L. Bartlett and James B. Steele, report on the "Bailout Nine". That is, the bankers that then-Treasury Secretary Henry Paulson called to the Treasury last October. Bartlett and Steele analyze the facts and ask the big questions:

...the reluctance of many banks to take the money in the first place, and the swiftness with which other banks have repaid tarp funds, the main conclusion to be drawn is that relatively few were actually endangered. Rather than targeting the weak for relief—or allowing them to fail, as the government allowed millions of ordinary Americans to fail—Paulson and Treasury pumped hundreds of billions of dollars into the financial system without prior design and without prospective accountability. What was this all about? A case of panic by Treasury and the Federal Reserve? A financial over-reaction of cosmic proportions? A smoke screen to take care of a small number of Wall Street institutions that received 100 cents on the dollar for some of the worst investments they ever made?
Who was the leader in receiving 100 cents on the dollar on bad investments? Goldman Sachs. What banks were allowed to fail (or be absorbed) before the bailout out took place? Goldman Sachs direct competitors Bear Stearns and Lehman Brothers. What did Hank Paulson do before he became Treasury Secretary? He was Chairman and CEO of Goldman Sachs.

1 comment:

  1. It is surprising not to see this question widely discussed in press, but... Why GS hasn't been torched yet? Not even a little, as a token gesture of public disapproval of their misdeeds.