The following is my paraphrasing of this morning’s NBC “Meet The Press” interview, alongside my views.
Overall, I’d say that Hank Paulson is a good man who is trying hard, but that doesn’t make him the right person to be managing this situation. There never was a proactive risk management process in place. He continues to rush into decisions, reactively, without consulting a bi-partisan team of credible financial experts. I have seen this movie before. It doesn’t end well. We need someone to takeover, sooner than he can scare Congress into implementing these hurried decisions.
KM
Tom Brokaw = TB
Hank Paulson = HP
Keith McCullough = KM
---
TB
If you brought this deal to your Partners at Goldman, they’d send you out and say “come back when you have more answers”, wouldn’t they?
HP
Tom, I don’t look at it that way. This is not something that we wanted to do, this is something that is very necessary… American companies were not able to raise financing, this is very serious.
*KM
Of course he doesn’t look at it that way. In 2005-2006 it was all about making as much money as he and his Partners at Goldman could. Now he wants to socialize
the downside of their losses. This is very serious, for the investment banking firms who are locked into these compromised operating structures. Very serious,
indeed
----
TB
The cover of Newsweek calls you “King Henry”. Richard Shelby says you are jumping from crisis to crisis like putting out brush fires…
HP
Tom, there are a lot of questions… and I can understand there are a lot of questions… let me address the first part, the cost… we can’t determine what the cost will be
today… this is not a position where I like to see the tax payer, but this is far better than the alternative… the average American watches the stock market; they watch
the market drop about 1000 pts, then recover on this plan… what they don’t see is what is going on in the credit market. This is a serious situation and we need to
avoid it.
*KM
This was the hardest answer to watch Hank stutter through. He doesn’t know the cost, and he won’t be around to be held accountable to it in the end anyway. He
says it’s all about the credit market, but at the same time, he only makes these hurry up offense decisions when the stock market is going down, and John Mack and
Llloyd Blankfein are crying wolf about evil doer short sellers. I don’t get it.
---
TB
Is the stock market’s rally late in the week a false positive?
HP
It’s not what we should be looking at… we need to be looking at what is going on in the credit market… it is very fragile and frozen… and we do something to deal with this, and do it quickly.
*KM
Right, right… don’t look at the stock market folks… c’mon Hank.
---
TB
Are the fundamentals of the US economy staggering?
HP
What I would say is I won’t bet against the American people… I would not bet against the long term fundamentals of this country…
*KM
In English the answer to Brokaw’s question is yes. See all comments from Paulson, including those back in April where he called the credit crisis being behind us, where his answer to this question has always been no.
---
TB
You want this all to be run by the Treasury Dept – Warren Buffett says we need a non-partisan czar like Bloomberg to run it – why isn’t that a better idea than having Treasury run it, because you are going to leave Treasury in January?
HP
Tom, what I am doing is reacting to the situation we have in front of us today… we have authority to move very quickly… the plan we have is one that will work… future administrations can run this anyway that they would like to run it…
*KM
This is very straightforward. Paulson wants nothing to do with a partisan decision making team that proactively prepares for the next 3-5 years, or 3 to 5 months for that matter. He is “reacting” to an economic crisis that he didn’t foresee. He asks his investment banking friends for help rather than building a team of credible experts (Buffett, Bloomberg, Griffen, etc...).
---
TB
But why not start a new process, structure, and regulation now?
HP
We need to manage these assets and manage them quickly – that is the situation we have in front of ourselves today…
*KM
Again, he didn’t have time to do it right, and he certainly isn’t taking the time to do it over properly. Rush, rush, rush…
---
TB
And simultaneously develop new regulations?
HP
No Tom, that’s not doable immediately… what’s going on here is terrible it’s inexcusable, and we need to deal with it… but that is going to take some time to figure that out and do it carefully and well… we can’t deal with that in a week, we need this legislation in a week, because we have a problem in our capital markets to deal with…
*KM
The problem in our capital markets is the people calling the shots. We have a crisis in both judgment and leadership in the US Financial System. These people rush into every decision, and use broad stroking alarmist rhetoric to strike a chord with politicians who readily support them.
---
TB
Some people are concerned with your ad hoc approach. You let Lehman fail, but Hank Greenberg at AIG says he could have saved the company for $20B.
HP
A lot of people are saying a lot of things Tom, and a lot of people want to rewrite history, but we have had some tough situations to deal with here, so let me go through them one at a time… there were no buyers for Lehman – it was a very sad situation… AIG was a few hours away from declaring bankruptcy – the government came in and avoided a real catastrophe in our financial markets… AIG created very much a hedge fund on top of insurance companies – something like this in my judgment should have never happened
*KM
If AIG is a hedge fund, what is Goldman Sachs?
---
TB
Sophisticated investors are pulling their money out of money market accounts – the domino effect here is going to be a no growth economy isn’t it?
HP
Tom, you made my case for me. That is why we need these powers. That is why we need Congress to move quickly… it pains me tremendously to put the American tax payer in this position, but it’s better than the alternative… but we need to do it
*KM
The alternative is to let free markets trade. Every time the brain-trust of Investment Banking Inc. intervenes, and/or regulate their clients rather than themselves, this creates a more protracted downturn. Governments don’t end bear markets. Investment bankers don’t either.
Keith R. McCullough
CEO and Chief Investment Officer
Research Edge LLC
Overall, I’d say that Hank Paulson is a good man who is trying hard, but that doesn’t make him the right person to be managing this situation. There never was a proactive risk management process in place. He continues to rush into decisions, reactively, without consulting a bi-partisan team of credible financial experts. I have seen this movie before. It doesn’t end well. We need someone to takeover, sooner than he can scare Congress into implementing these hurried decisions.
KM
Tom Brokaw = TB
Hank Paulson = HP
Keith McCullough = KM
---
TB
If you brought this deal to your Partners at Goldman, they’d send you out and say “come back when you have more answers”, wouldn’t they?
HP
Tom, I don’t look at it that way. This is not something that we wanted to do, this is something that is very necessary… American companies were not able to raise financing, this is very serious.
*KM
Of course he doesn’t look at it that way. In 2005-2006 it was all about making as much money as he and his Partners at Goldman could. Now he wants to socialize
the downside of their losses. This is very serious, for the investment banking firms who are locked into these compromised operating structures. Very serious,
indeed
----
TB
The cover of Newsweek calls you “King Henry”. Richard Shelby says you are jumping from crisis to crisis like putting out brush fires…
HP
Tom, there are a lot of questions… and I can understand there are a lot of questions… let me address the first part, the cost… we can’t determine what the cost will be
today… this is not a position where I like to see the tax payer, but this is far better than the alternative… the average American watches the stock market; they watch
the market drop about 1000 pts, then recover on this plan… what they don’t see is what is going on in the credit market. This is a serious situation and we need to
avoid it.
*KM
This was the hardest answer to watch Hank stutter through. He doesn’t know the cost, and he won’t be around to be held accountable to it in the end anyway. He
says it’s all about the credit market, but at the same time, he only makes these hurry up offense decisions when the stock market is going down, and John Mack and
Llloyd Blankfein are crying wolf about evil doer short sellers. I don’t get it.
---
TB
Is the stock market’s rally late in the week a false positive?
HP
It’s not what we should be looking at… we need to be looking at what is going on in the credit market… it is very fragile and frozen… and we do something to deal with this, and do it quickly.
*KM
Right, right… don’t look at the stock market folks… c’mon Hank.
---
TB
Are the fundamentals of the US economy staggering?
HP
What I would say is I won’t bet against the American people… I would not bet against the long term fundamentals of this country…
*KM
In English the answer to Brokaw’s question is yes. See all comments from Paulson, including those back in April where he called the credit crisis being behind us, where his answer to this question has always been no.
---
TB
You want this all to be run by the Treasury Dept – Warren Buffett says we need a non-partisan czar like Bloomberg to run it – why isn’t that a better idea than having Treasury run it, because you are going to leave Treasury in January?
HP
Tom, what I am doing is reacting to the situation we have in front of us today… we have authority to move very quickly… the plan we have is one that will work… future administrations can run this anyway that they would like to run it…
*KM
This is very straightforward. Paulson wants nothing to do with a partisan decision making team that proactively prepares for the next 3-5 years, or 3 to 5 months for that matter. He is “reacting” to an economic crisis that he didn’t foresee. He asks his investment banking friends for help rather than building a team of credible experts (Buffett, Bloomberg, Griffen, etc...).
---
TB
But why not start a new process, structure, and regulation now?
HP
We need to manage these assets and manage them quickly – that is the situation we have in front of ourselves today…
*KM
Again, he didn’t have time to do it right, and he certainly isn’t taking the time to do it over properly. Rush, rush, rush…
---
TB
And simultaneously develop new regulations?
HP
No Tom, that’s not doable immediately… what’s going on here is terrible it’s inexcusable, and we need to deal with it… but that is going to take some time to figure that out and do it carefully and well… we can’t deal with that in a week, we need this legislation in a week, because we have a problem in our capital markets to deal with…
*KM
The problem in our capital markets is the people calling the shots. We have a crisis in both judgment and leadership in the US Financial System. These people rush into every decision, and use broad stroking alarmist rhetoric to strike a chord with politicians who readily support them.
---
TB
Some people are concerned with your ad hoc approach. You let Lehman fail, but Hank Greenberg at AIG says he could have saved the company for $20B.
HP
A lot of people are saying a lot of things Tom, and a lot of people want to rewrite history, but we have had some tough situations to deal with here, so let me go through them one at a time… there were no buyers for Lehman – it was a very sad situation… AIG was a few hours away from declaring bankruptcy – the government came in and avoided a real catastrophe in our financial markets… AIG created very much a hedge fund on top of insurance companies – something like this in my judgment should have never happened
*KM
If AIG is a hedge fund, what is Goldman Sachs?
---
TB
Sophisticated investors are pulling their money out of money market accounts – the domino effect here is going to be a no growth economy isn’t it?
HP
Tom, you made my case for me. That is why we need these powers. That is why we need Congress to move quickly… it pains me tremendously to put the American tax payer in this position, but it’s better than the alternative… but we need to do it
*KM
The alternative is to let free markets trade. Every time the brain-trust of Investment Banking Inc. intervenes, and/or regulate their clients rather than themselves, this creates a more protracted downturn. Governments don’t end bear markets. Investment bankers don’t either.
Keith R. McCullough
CEO and Chief Investment Officer
Research Edge LLC