If you've read, are reading, or plan to read Andrew Ross Sorkin's Too Big To Fail, you also need to pick up a copy of Hank Paulson's memoir, On The Brink. Sorkin has the bankers' story, in sordid yet compelling detail, of how they received the most generous bailout in the world financial history during fall 2008 -- and set us up for great problems to come. Paulson tells us why, when, and how exactly he let them get away with this.
Hank Paulson does not, of course, intend to be candid. As I review in detail on The New Republic's The Book site this morning, On The Brink is actually a masterpiece of misdirection and disinformation.
But still, he gives it all away -- and if any details remain obscure, check them in Sorkin. Paulson honestly believes that the financial sector as constructed is productive, makes sense, and should continue to operate in roughly its current form.
Whether or not Paulson really understands the functioning of big banks in the U.S. today is an interesting question -- for example he never mentions how they treated customers during the boom, and there is not one word about the need for greater consumer protection moving forward. On the other hand, perhaps this omission tells us that he understands the game all too well -- and is keen for it to continue.
He certainly did his best to make that happen.
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