Paulson Was Willling to Consider Anything to Save Goldman

Andrew Ross Sorkin is releasing excerpts from his new book “Too Big To Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves” in this month’s Vanity Fair magazine. I am looking forward to reading the whole book but just from the excerpts Sorkin provides it gives the strong impression that rather than being “of the people, by the people, for the people,” our U.S. Government officials are/were devoted to Wall Street more than anything else.

Take for instance these two quotes:

Sorkin reports that the deal, which was nearly consummated, would have merged Goldman Sachs and Wachovia. Henry M. Paulson, the Treasury secretary and former C.E.O. of Goldman, was deeply involved in the process, contacting both Lloyd Blankfein, Goldman’s current C.E.O., and a Wachovia board member, and strongly urged both to consider it. Wachovia’s C.E.O., Robert Steel, was a former vice-chairman at Goldman Sachs and Paulson’s former number two at the Treasury Department.

Sorkin reports that Warren Buffett was also contacted about investing in the merged company, but told a banker at Goldman that it would never happen. “By tonight the government will realize they can’t provide capital to a deal that’s being done by the former firm of the Treasury secretary with the company of a former vice-chairman of Goldman Sachs and former deputy Treasury secretary,” Buffett said. “There is no way. They’ll all wake up and realize, even if it was the best deal in the world, they can’t do it.”

Click for VANITY FAIR ARTICLE

It seems as if Warren Buffet is the only one that’s not confused as to what the Federal Reserve and Treasury are supposed to be all about.

Comments

[Warm_Paw:]

If the Federal Reserve is now in bed with Wall Street - investing is not such a good idea and we're in worse financial straits than we know.
I blame Greenspan for what is happening - back to politics.
Is there an agency that is objective and can maintain focus on it's charter as opposed to caving in to influence by those who employ them?

Oct 01 12:00 PM

[ilovesum:]

Of course the FED is controlled and in bed with Wall Street

www.redicecreations.co...

Oct 01 01:34 PM

[Jasper M:]

On Oct 01 12:00 PM Warm_Paw wrote:

> Is there an agency that is objective and can maintain focus on it's
> charter as opposed to caving in to influence by those who employ
> them?

It is the nature of such relationships that regulatory agencies inevitably get captured by the industries they are set up to watch over/ And most especially by the largest of those entities, as they represent the pargest employment pool.
Think about it - where does the FDA get it's medical researchers from? It gets them from Merk, and Bristol Myers. Where does the EPA get its chemists from? Kodak, and American Cyanamid. Where does the SEC get its accountants from? From Wall Street! And back to those firms may someday go, and they know it, so they have a vested interest in dealing gently with their own possible future employers.
The problem is not a particular venality of our times, but rather something inherent in to the structure, and human nature. It is a testament to American sense that we have managed to put together systems where it's only a big problem once every couple of generations.

Oct 01 01:52 PM

[greedcanbgood:]

Jasper M - Nice point but it's meaningless. Where else is the government to find experts in various fields if not from the private sector? They can't hire folks straight out of academia to oversee peers with years, sometimes decades of experience.

Clearly, there are some exceptions. Narayana Kocherlakota from the U of MN was hired to hear the Minneapolis Fed. He's been a professor for much of his career. Nonetheless, these are exceptions.

I'm listening to any solutions you might have....

Oct 01 04:39 PM

[Nathaniel C:]

Paulson is a criminal who should be indicted for financial terrorism. Remember his speech to congress which said if you do not give me 700 billion of taxpayer money (illegal under US Constitution) we are going to have a depression.

Oct 01 05:42 PM

[Jasper M:]

On Oct 01 04:39 PM greedcanbgood wrote:

> Jasper M - Nice point but it's meaningless.

My specialty! : )

>Where else is the government to find experts in various fields if
> not from the private sector?

Nowhere. I didn't say this was something we could avoid. It WILL happen, that's my point. Best we can do is recognize it, and make individual preparations.
(I WILL opine that the best preparation is minimizing the scope of government authority - concentrates authority is easier to capture)

> They can't hire folks straight out of academia

Nor would we want to! Goodness, have you seen the nonsense that flourishes in academia these days? If anything, it is Worse than the oligopolies, since its connection to real-world considerations is even more tenuous.

Oct 01 07:24 PM

[greedcanbgood:]

Heh! Ok then, point well made. ;-)

Oct 02 10:19 AM

[Jimbo:]

Let the record show that the Republicans in the House, to a person, refused to endorse the first Paulson proposal although I believe some of them did go for the second move. The cesspool in Washington must be cleansed of both parties. Be sure to vote in 2010 if we still have a country then. Term limits must be enacted!!!

Oct 02 10:53 AM