"Everyone" Says Paulson Has Credibility: What About His Impossible Conflict-of-Interest?

As indicated in "The Proposed Bailout: Zero Pain for the Perpetrators, Toxic to Taxpayers" (September 21, 2008), the major provisions of the Paulson proposal cede enormous unaccountable power to the Administration (i.e., the Treasury Secretary), and virtually guarantee conflicts of interest for financial institutions that are going to be valuing one another's bad loans, creating "comparables" that can then be used to justify overvaluing their own loans.

An additional factor that must be considered is Treasury Secretary Hank Paulson himself. As former Chairman of Goldman-Sachs, it is highly likely that Paulson holds a significant stake in that investment-bank-cum-deposit bank. Any move Paulson makes with his $700B of unaccountable money will likely help Goldman-Sachs share prices.

How can he, Paulson, have any credibility making decisions in executing the mortgage related asset (MRA) sales to the government?

James Boyce pointed out today that Paulson is to the credit crisis what Powell was to the Iraq War...the front person with street-cred who can sell both the crisis and the prescription. ("In Today's Performance, The Role of Colin Powell Will Be Played by Henry Paulson", September 19, 2008).

Paulson should have lost whatever credibility he had with the Treasury proposal: Zero accountability, no court or review board can ever review their decisions. $700B. A license to hire financial firms (i.e., his buddies) to "help," even though many of those have conflicts of interests. No limitations on companies' executive compensation OR severance packages.

In business when one receives a totally outrageous proposal from the other side, trust immediately evaporates. That does not mean that proposals that one knows will be bargained are not advanced, but there is a general idea of the meets-and-bounds of what constitutes something reasonable.

So, with Paulson's personal conflict-of-interest, and his outrageous proposal, here's my question:

Why does ANYONE trust Hank Paulson?

p.s. Anyone wanting just to get an idea of transactions that got us here, go to http://en.wikipedia.org/wiki/Credit_default_swap, and read down to see how the Credit Default Swaps worked. How many of the banks that bought these really understood what they were buying?

Comments

[NicoleAnon]

WASHINGTON - Goldman Sachs chief Henry M. Paulson Jr., President Bush"s pick as the next Treasury secretary, will sell his substantial holdings in the Wall Street investment firm, the White House said Thursday.

Spokeswoman Dana Perino said Paulson is making the sale in order to conform with federal conflict-of-interest rules.

She said the sale would include all of his holdings in Goldman Sachs. Perino also said that both Paulson and his wife will sell any assets that create conflicts of interest.

As part of his moves to conform with government conflict-of-interest regulations, Paulson has agreed to sell his Goldman Sachs shares as well as stock options that have not yet vested, the White House said.

[PJay1]

Thank you for stating the obvious, Mr. Abrams.
It's an outrage to hear the Dems praising King Henry, knowing his background.

[normathumb]

This administration has such a record of lies and deceit, I wouldn't give anyone with their backing the benefit of the doubt. This is the economic equivalent of congress' blank check to war in Iraq. No oversight, my a$$. As usual, they want absolutely no oversight and unlimited power. And they still claim to be for smaller limited government. 700 billion, maybe a trillion or more and no oversight, I got an idea, I'll sell you my car and you have to buy it but I wont tell you what the cost is and you can't ask. Now, where's that first payment. Then again, this president has every reason to believe we are that stupid. After all, look at the way he bought us Iraq.

[SurfCat]

CRASH @ the KOOL-AID STATE ( FASCIST ECONOMY )

"Socialize" losses at the rigged crashes and take blood profits at pre-cooked bubbles. Or as anti-Fascist historian Gaetano Salvemini said: "The State pays for the blunders of private enterprise... Profit is private and individual. Loss is public and social."

Organized Corporate Crime metaphor:

Paulson is a ruling class capo Mafiosi selling an extortion racket that needs to go down very fast and hard before anyone wakes up. By the time the general public realizes the Wall Street "bailout" is a private hijack and takeover operation on the American economy guaranteed to be unaccountable, the next band of temp ruling class stooges will be in office making their usual excuses.

This started with a private Ponzi trap "Federal Reserve" Corporation (never federal, zero reserves) that prints money out of thin air in a failsafe giveaway program to the ultra-privileged.

http://www.thisisby.us/index.php/content/crash__the_kool_aid_state

Paulson and Bernanke both seek to protect over a QUADRILLION dollars ($1,240 TRILLIONS) of a derivates Wall Street bubble for near 20 times the planet"s global GDP.

The truth is, Organized Corporate Crime rule has already broken the globe. The criminals now want to putsch the results of massive greed and criminal private profit onto a naïve public.

Manmade crisis this large ALWAYS occurs by design. Usually Fascist design. Global wars and economic crashes are about extorting public wealth for private power. Always have been.

[AnotherV]

Perhaps someone has already posited this notion. If not, I accept the necessity of doing so. A trillion dollars buys alot of champagne and caviar. Do (WE THE PEOPLE) really think these Wall "ALLEY" money thugs are going to take push back from Congress lying down. I doubt they will. Hate to say it, but I feel a "moment" coming. A very special kind of "moment". Can you say, "Wag the Dog?". For a measly million (or so), ANYTHING can happen. Especially something designed to evoke "fear" and "patriotism". To hell with fear. I vote for patriotism. No oversight. No approriate protections for American taxpayers. No 700 billion. No matter what "they" wag! Oh my. Did I type that out loud?

[kgb999]

It really seems that his proposal read more like a bargaining position than a proposed solution.

[XME]

I think he lost his credibility by acting one day like everything was fine, they don't need to bail out anyone else, and the next like it will be Armageddon if we don't act NOW NOW NOW and pass his idea ASAP, no questions asked.

Granted, a serious recession, ala 1929 would be horrible, but I'm when I think about things like the Patriot Act, and WMDs in Iraq that passed off as urgent and we must act NOW, I'm more inclined to take out chances and make sure nothing goes throught without HUGE safeguards and oversight and accountability...and if they can't do that, then let them fail, bring on the depression, and lets start over. If it's that urgent, they should have had some idea this was urgent a LOT sooner than three days ago when they claimed it must be done NOW. I think we've fallen for that line far too many times from the Bush Administration.

One thing's for sure...if he hadn't already done so, as of last week GWB has cemented his status as one of the worst presidents EVER in our history.

[bedrocklib]

One question.

What about his successor?

[reininop]

I'm not positive, but didn't he have to sell all of his stake in Goldman Sachs? At a tax-free profit of course since he was accepting a political appointment. If this is true, it invalidates a lot of your argument. I still believe you are correct, I suspect his buddies and himself will profit in the end, but not directly from Goldman Sachs stocks now.

[schatsie]

that is not true, they do not have to sell their holdings....you will never believe this, they put their assets in a - get this - BLIND TRUST..... Yes we are supposed to trust them that they will not take advantage of information....right, and if you believe that we have lots of land in Florida...

These people have eviscerated the executive branch including all the regulatory functions so that nobody ever knows what they are up to..

Fact is, the Repugs deregulated, the CEOs raped and pillaged and why we would ever trust either one or the other is beyond me.....and trusting both Paulson and the CEOs is absolutely unconscionable to our children....

[Totallyorderless]

Dear Mr. Paulson,
I knew credibility. Credibility was a friend of mine. YOU SIR, are not credible.

[Totallyorderless]

Let's just start by opening every failing (and soon to fail) Wall Street corporations' financial records, and making them public. Just an idea.

[robeson]

Any bailout should include Paulson's resignation.

[tompoe]

Paulson's fine. Missing some transparency, is all. Of course, transparency would reveal the raping and pillaging of the last eight years. It's important to close the books, seal them, maybe burn them. What better way than to use Bush's going away present of $1 trillion in taxpayer dollars at the same time? Can't wait to read his book. It should be out in a few minutes. He just photocopies Tenet's book, retitles it, and goes on tour proclaiming he tried to stop the bailout, but they wouldn't let him.