I’ve been reading Hank Paulson’s book, On The Brink and I now know why the Wall Street bailout happened. Hank was a Wall Street guy who thought the world rose and set on spreads and the capitalization of large banks. If you are a deal maker with a Wall Street-centric view, the world ends when the banks get into a jam. He called anyone who disagreed with him an idiot. He brought government power, as many of his Wall Street friends as possible, fear, panic, and passion to the fight to advocate that if his plan wasn’t adopted- that an apocalyptic economic collapse was inevitable.
Now I’m not so naive as to suppose that the collapse of a major bank or an insurance giant wouldn’t have far reaching impacts on the economy as a whole, but I believe those shocks fix systemic imbalances. Americans and their economy are resilient. The whole TARP and stimulus has simply kicked the can down the road and delayed the day of reckoning. I believe despite his tireless work, and belief in what he was doing, history will not judge him well.
In the future, if you don’t want a one-trick (M&A), Wall Street centric government, don’t hire an ex-investment banker to be Secretary of the Treasury. As an interesting aside, the current administration power players: Obama, Geitner, Bernake, Pelosi, Reid, Frank and the Chinese all seemed to be more prominent players than anyone in the Bush administration, who Paulson supposedly worked for.