Hank Paulson Admits He Never Really Understood How Mortgage-Backed Securities Worked

Discussion in 'Wall St. News' started by ByLoSellHi, May 25, 2009.

  1. http://business.theatlantic.com/200...dnt_understood_mortgage_backed_securities.php


    May 25 2009, 9:05 am by Derek Thompson

    Hank Paulson Admits He Doesn't Understand Mortgage Securities

    This quote, from Newsweek's piece on former Treasury Secretary Hank Paulson, strikes me as a bombshell:

    Paulson--by his own admission--was not paying much attention to the way banks were slicing and dicing mortgages and selling them as complex securities. "I didn't understand the retail market; I just wasn't close to it," he told NEWSWEEK.

    If Newsweek won't play prosecutor, I will: "Hank Paulson, you were Goldman's chief executive as mortgage securities boomed in 2004-5. Your earned an incredible severance, partly because of it. And you say you didn't understand mortgage securities? How is that remotely possible?"

    I'd like to offer a bit of analysis, but all I've got is bewilderment. The reason I find the revolving door between Wall St. and Washington somewhat acceptable is that I think it's important that those who govern Wall Street understand it. But Paulson, by his own admission, didn't really. Think about this: A guy whose $46 million compensation package was made possible by leaving during Goldman's mortgage-security boom "was not paying much attention" to the mortgage-security boom! I don't know if Paulson is fibbing, or if mortgage-securities were such a specialized and esoteric money machine that basically nobody understood what was going on, but either way, this seems devastating.

    Also in the department of buried leads, Paulson denies "secretly arranging" Bank of America's merger with Merrill Lynch. That also seems impossible to believe. New York Attorney General Andrew Cuomo testified in April that Paulson and Ben Bernanke did strong-arm Ken Lewis into eating Merrill's big ugly balance sheet. The article claims that B of A's chief exec Ken Lewis was interested in snagging Merrill's retail brokers. Well look, retail brokers are nice things to have, but clearly Lewis was more interested in the Feds not gutting his board in retribution!

    Apparently Paulson is resuscitating his reputation like a doctor defibrillating a patient with wooden stakes, but just as culpable here is Newsweek. This was the magazine's fresh attempt to appear like something other than a bullhorn for conventional wisdom. It seems to me that one really good way to stop seeming like a mouthpiece for the half-truths of powerful people isn't more dynamic graphics -- it's to stop being a mouthpiece for the half-truths of powerful people.
  2. Don't worry, bank executives never understood these too!
  3. jem


    Joining the list of bold lies

    1. I love you
    2. checks in the mail
    3. I knew nothing about mortgages

    These guys are absolutely shameless.
    The career path at wall street obviously rewards those who are most skilled at screwing people out of money and then lying about it like a psychopath.

    Our best and brightest liars.

    I nominate him for one of the worlds most disgusting people.
  4. 4. I'm not drunk
    5. Just another beer and we'll leave
    6. Just the penis head, honey
  5. Jim Rogers: "Paulson is a fool. Bernanke is an idiot. Geithner is a clown. They're all idiots."

  6. I'd rather he answer why he wouldn't let Lehman become a bank holding company. I'm sure he understands bank holding cos.
  7. Speaking of Geithner is a clown.

    When asked to show the contents of his wallet, Geithner produced a note from Zimbabwe, a NY metro card and a Euro. :D
  8. Do you KNOW what Paulson said or meant? For all you know he spoke for another 20 minutes explaining further.

    Smart politicians-and Paulson has never run for elective office-heed the advice from handlers to "stay on message." That phrase means to keep repeating like an idiot a series of short talking points as protection from words being taken out of context or edited.

    Athletes and entertainers both know how the game works. That's why the most media savvy don't say dick to reporters.

    Actually I find the B of A comments plausible and I was on the other side of the fence earlier. If Lewis did in fact want to acquire retail assets then he sure as hell had to know he was going to have to take some bad too. It would be like you saying, "I want the Cadillac CTS division but not the Escalade and XLR and CERTAINLY not those pesky pension obligations." Surrrre....

  9. Didn't Greenie himself say that he didn't know how those things really worked?

    In House of Cards he stated that he didn't know how some of those instruments were calculated.

    I think the derivative writers made it up as they went along.
  10. An attempt at plausible deniability?

    When you are running GS, there should be plenty of guys there you can call on to hep 'splain it to you. Unless you don't want to know.

    But then, whatever it was, it was good enough to want to be one of a group to petition Donaldson at the SEC to let you up your leverage during the big bubble.

    "I don't know how it worked, and there was no one in the company who could explain it even to me, the CEO, but I thought it could go on forever so I helped banks leverage up."
    #10     May 25, 2009