Henry Paulson is doing what he does best:
bundling risk and passing it down the line.
It's like a giant pyramind scheme. The problem is that all pyramind schemes crash. What happens when the risk hits the bottom line. Us.
Guess what, there are no guarantees on the outcome of this plan. No guarantees for the millions of American tax payers that are buying this massive packaged risk.
Naomi Klein:
NAOMI KLEIN: You know, Amy, I don’t think we can stress this enough. Henry Paulson is one of the key people, the top people, responsible for creating the crisis that he is now claiming he will solve, you know, and this is—if we think about the 9/11 analogy and, you know, the state of shock that Americans were in after 9/11 and the emergence of Rudy Giuliani as the savior—and, you know, people have so much regret about that. And in the book, I write about this as the state of regression that we go into when we’re frightened. And I think Henry Paulson has really been cast in this role as an economic Rudy Giuliani, saving the day, impartial, bipartisan, a strong leader.
I found this article in BusinessWeek that ran when Paulson was appointed to the Treasury, and I just want to read you one sentence, because I think it’s all we need to know about Henry Paulson. This is from BusinessWeek, when he got the appointment as Treasury Secretary in 2006. The headline of the article is "Mr. Risk Goes to Washington." It says, "Think of Paulson as Mr. Risk. He’s one of the key architects of a more daring Wall Street, where securities firms are taking greater and greater chances in (their) pursuit of profits. By some key measures, the securities industry is more leveraged now than it was at the height of the 1990s boom."
Then it goes on to say that when Paulson took over Goldman Sachs in 1999, they had $20 billion in debts. When he—in these high-risk gambles. When he left, they had $100 billion, which means he took their risk level from $20 billion to $100 billion. So it is absolutely no exaggeration to say that Henry Paulson, far from speaking for Main Street, is actually bailing out his colleagues for some of the very debts that he himself accumulated. This is an extraordinary conflict of interest.
DemocracyNow
I vote no confidence on this man.
If this risk-taking bill passes, and it fails, what happens then.
It's time to look at the different plans and ideas coming from outline Wall Street. Wall Street can wait.
Take care of the people in foreclotures first.
Here is part of the Business Week article:
Wall Street has always been about taking risk. But never has the "R" word been such an obsession for the men and women who rule the nation's biggest investment banks. Never have they had to reconcile so many bets made on so many fronts. The conditions have been ripe. Historically low interest rates and relatively calm markets in the last few years have allowed a new type of firm to flourish, one that acts primarily as a trader and only secondarily as a traditional investment bank, underwriting securities and advising on mergers.
Goldman Sachs' CEO Henry M. Paulson Jr. has led the charge. Major Wall Street firms have watched with envy as Goldman has repeatedly racked up record earnings on the strength of its trading business. The biggest stunner came in March when Goldman announced that in three months it had tossed off $2.6 billion in profits -- nearly half as much as it earned in all of 2005 -- on $10 billion in revenues. Not coincidentally, Goldman also put a record amount of the firm's capital at risk of evaporating on any given trading day. Its so-called value at risk jumped to $92 million, up 135% from $39 million in 2001. "[Goldman is] a horse of a different color now," says Samuel L. Hayes III, professor emeritus of investment banking at Harvard Business School.
As Paulson prepares to move to Washington to serve as U.S. Treasury Secretary, Goldman shows no sign of easing up. Nor do its followers. This trading boom, fueled by cheap money, is fundamentally different from the ones of the past. When traders last ruled Wall Street, during the mid-'90s, few banks put much of their own balance sheets at risk; most acted mainly as brokers, arranging trades between clients. Now, virtually all banks are making huge bets with their own assets on many more fronts, and using vast sums of borrowed money to jack up the risk even more. They're shouldering risks for their clients to an unprecedented degree. They're dabbling in remote markets from Brasilia to Jakarta, and in arcane products like credit-default swaps and catastrophe bonds. Led by Goldman, many investment banks now do more trading than all but the biggest hedge funds, those lightly regulated investment pools that almost brought down the financial system in 1998 when one of them, Long-Term Capital Management, blew up.
What's more, banks are jumping into the realm of private equity, spending billions to buy struggling businesses as far afield as China that they hope to turn around and sell at a profit. With $25 billion of capital under management, Goldman's private equity arm itself is one of the largest buyout firms in the world, according to Thomson Venture Economics. The moves are not unrelated to trading. In both cases, banks are flocking to exotic and inaccessible markets where there aren't many others to fight for profit. Counterintuitively, they're seeking out the investments that would be the hardest to get rid of in the event of a disaster. They're betting, in other words, that handsome returns when times are good will make up for losses when things turn ugly.
Business Week