Hank Paulson, hero?

By Felix Salmon
September 12, 2013

1338_cov304x4151.jpgHank Paulson had a good crisis. That’s why he’s getting hero-worship on the cover of Bloomberg Businessweek magazine; he is also pretty much the sole interviewee in a hagiographic 90-minute documentary, produced by Bloomberg, which is about to appear on Netflix. The combination is being promoted with the idea that “no one felt the impact” of the financial crisis more than Paulson, which is obviously false, but which also gives a pretty good idea of the whole project’s point of view. (The film never mentions, for instance, that Paulson received more than $500 million, tax free, for his Goldman Sachs stock when he sold it before moving to Treasury.)

Paulson has an interesting take on the various ways in which the crisis could have gone worse. First there was Bear Stearns: if he hadn’t managed to rescue the bank by finding a buyer in JP Morgan, says Paulson, then the chain reaction would have started. “If Bear Stearns had gone, then Lehman would have gone immediately thereafter, and we hadn’t fixed Fannie or Freddie yet. We would have had Armageddon”. The Bear rescue, according to Paulson, bought precious months during which Paulson could deal with Frannie, and during which Ben Bernanke could start setting up the various borrowing windows and liquidity programs which would help to stabilize the financial system.

Paulson also says, in the documentary — and this is a theory I haven’t heard before — that we would have been worse off if Bank of America had bought Lehman Brothers. If that had happened, he says, then there wouldn’t have been any buyer left for Merrill Lynch — and Merrill’s implosion would have been much worse than Lehman’s was.

It would be nice to see these claims — and Paulson’s tenure more generally — interrogated impartially by the Bloomberg Businessweek editorial machine, which is pulling out all the stops in terms of publicizing its Paulson extravaganza. (It’s even roping in Mike Bloomberg himself, something which has never happened before.) But with a documentary director who now considers Paulson to be “a national hero”, and a cover story which bears Paulson’s own byline, the former Treasury secretary was never going to be facing any tough questions.

To their credit, on the other hand, Bloomberg invited me to a promotional lunch with Paulson today, and so I took the opportunity to ask him about the perception that he always thought that he knew best, and that he considered popular opinion, and elected representatives, as annoying obstacles.

Paulson replied by saying that he “could not take greater exception with your comment”. He talked at some length about how he used his Goldman-honed client-schmoozing skills to get what he wanted from Congressional representatives on both sides of the aisle, but I must admit that I didn’t come away from his answer feeling as though he really respected those people’s views, or the importance of public opinion. And I’m perfectly happy to defend the argument that the arrogance of Paulson asking for a $750 billion blank check by presenting a three-page TARP bill was a significant reason why that bill was defeated.

I’m also happy that I got to ask Paulson about the secret meeting he held with the Goldman Sachs board in Moscow in June 2008. Even at the time, Paulson’s advisers thought it unwise; with hindsight, it seems indefensible. What could he have been thinking? But Paulson was unapologetic: “The incident you referred to was totally and completely appropriate,” he told me. “With a board of directors, people I hadn’t seen for years, I went to a social function with them, when we were in the same hotel, and said hi, and saw old friends”.

I don’t blame Paulson for the financial crisis; he was a good crisis manager — certainly better than either of his predecessors would have been — and he worked extremely well with Ben Bernanke and Tim Geithner. Still, everybody made mistakes during those long sleepless weeks, and it would be nice if some of the principals were more willing to admit that. And I also look forward to rather harder-hitting documentaries from Bloomberg in the future. This one feels altogether too promotional — both of Paulson and of Bloomberg Businessweek itself. The film is basically just one long interview with Paulson, intercut with a few words from his wife, and quite a lot of contemporary news footage and headlines. Including, notably, this anachronism:

Screen Shot 2013-09-12 at 4.42.30 PM.png

This story came out in November 2008; Bloomberg didn’t buy Businessweek until October 2009. Both Bloomberg Businessweek and Hank Paulson have a lot of good qualities. But this film does end up feeling as though it’s trying a bit too hard to make them both look good.


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If you had to make the false choice between the 3 page 750 billion dollar TARP bill and the Health care bill which runs thousands of pages which do you think would be better legislation?

Secondly you mention Hank’s big windfall from Goldman… I would argue that when someone is dynastically wealthy like Paulson or Bloomberg and they elect to enter public service rather than spend the rest of their life enjoying fine food and fast women… that’s pretty admirable in my book… plus I think he’s one of the all time largest donors to the nature conservatory.

Posted by y2kurtus | Report as abusive

To the guy above me, so by your logic an expensive corporate welfare bill that benefits a tiny elite is better than a longish, less expensive bill that helps a much higher percent of the population? That’s some twisted logic. Are you sure you aren’t Hank Paulson defending yourself?

And who cares if he gave to charity. Murderous drug lords and all sorts of shady characters give to charity. It’s one of the easiest ways to disinfect your awful deeds in life.

Posted by ShaunyP26 | Report as abusive

Hank Paulson was a Wall Street insider that saved Wall Street. We should have let some of the banks fail. Now we have more debt as a nation, some zombie banks that are now huge, and a new economy that is reliant on less jobs!!

Posted by KyleDexter | Report as abusive

You don’t even have to be a fancy economist to know when someone screwed up. That is the beauty to this that Paulson and his spin doctors just don’t get. Either Paulson was inept and took the job based on his ego and put the nation at risk or he let his buddies walk with their pockets full. Both a fail. It seems that Paulson didn’t understand so much on this….apparently he didn’t get that the bankers were greedy so he negotiated like a little girl and let them keep their big salaries AND bonuses. He says he had no idea about all the sleazy banking stuff that was impending but you had to be a complete idiot to not know if you were in commercial banking at all. They use his wife as a way to endear us to it all and well wasn’t Mrs. Jerry Sandusky clueless too? But probably not nearly as wealth. Mrs Paulson has over 500 million reasons to be supportive. The S & L scandal years earlier sent 1,000 bankers to jail. Not one of the commercial bankers are in jail. How can that be when MILLIONS of Americans lost their homes, jobs and hope? Obama and his special prosecutor also let the bankers walk and many close to the cases have left D.C. in disgust never to get involved again. The prosecutor is now working for one those who was being investigated. HO hum that is how America rolls today. These guys play by different rules for sure and I will not be watching this documentary on my Netflix nor will I download the book to my Kindle. I would advise others not to let the producers or any of this profit from all this propaganda on Paulson. Like many who get old they get religious and try to hedge their bets and rewrite history. They get all warm and fuzzy and do gooding. Paulson’s name and legacy is crap and will stay that way. No amount of book tours or movies is going to change what really happened. People will remember. I kind of think Paulson is a traitor in many respects, he put us all at great risk.

Posted by Trillium2 | Report as abusive

This is the reason why the US is in decline. It has created an elite that has entrenched itself. It dominates the media and keeps the poor poor. The American dream–class mobility–is dead.

Posted by RS108 | Report as abusive

Caught that current Bloomberg magazine cover of Paulson trying to look like some kind of beleaguered tough-guy poor heroic Hank under siege but toughing out his super-lucrative Post-Treasury/Post Goldman idle time…

Plus his kissy-face interview with his fully-disclosed good buddy Charlie Rose, along with the very weaselly Bloomberg magazine editor plus the equally in-the-Paulson-tank documentary director.

Seems there’s a Hanky Paulson p.r. clean-up campaign underway, “poor tough Hanky saved the planet” back in 2008 when really he just happened to be the guy who had Congressional members always seeking post-gov’t jobs and lucrative post-Gov’t careers/consultancies trying to stay on Hanky’s good side.

To this day, as the NY Post’s John Crudele reminds and attempts to gain access to the gov’t docs. How Hanky during the crucial days in SEPT/OCT 2008 spent numerous – scores – of yet-undisclosed/undefined phone conversations with his Goldman Sachs CEO successor, Lloyd Blankfein. Gee, wonder what these two apparent connivers were talking about that no one else knew, or likely won’t ever know?

Then there was the disgusting image of Hanky-boy joking about how he literally – literally – knelt at the expensively-shod feet of then-House-Speaker Nancy Pelosi as Hanky-boy desperately sought unimaginably huge sums of taxpayer funds and almost singular control over same.

And ol’ Hanky-boy wasn’t so shameless to seem to seek direct bailouts for Goldman and his other banking buddies (except of course Dickie Fuld, whom evidently Hanky-boy had some sort of snitty disdain for).

No, Hanky didn’t seek direct bailouts for his banking buddies. Instead, he coyly and Pelosi-foot-kissingly sought to bailout the bankers’ COUNTERPARTIES, mainly AIG, and that way, AIG took the heat and Goldman et al and some of Hanky-boy’s other favorites got bailed.

As an ardent FREE-MARKET advocate, it’s increasingly disgusting to see these kinds of oligarchic set-ups whereby you have Wall Street heavyweights revolving into and out of high, super-influential gov’t offices. Robert Rubin, Jacob Lew, Timothy Geithner, Paulson, and a truly cretinous exemplar of the breed: Jon Corzine.

On top of everything else, these “hotshots” like to run around claiming they’re the “smartest guys in the room,” yeah, it’s easy to be “smart,” when you have access to untold sums of that other slimey favorite tactic, “other people’s money” – especially taxpayers. And another Hanky-boy tactic is to come across as some kind of mumbling, down-home aw-shucks humble little me. Like Corzine, Lew, Rubin et al instead he is a relentless practitioner of taking often senseless risks with other peoples’ funds.

These “smart guys,” increasingly put not just the economic health of the nation at risk, they’re inviting the kind of oppressive regulation that risks curtailing the free-market’s highest ideals and benefits.

And let’s not even get started about how a lot of these cats belong in jail for long periods of time. And keep in mind in China, and self-described “Chinese expert” Hanky-boy should realize this. In China, they sometimes SHOOT those convicted of rank corruption. DickSheppard-Jersey City, NJ

Posted by DickShepJCNJ | Report as abusive