Skip to main content

On The Brink by Hank Paulson

Just completed Henry "Hank" Paulson's On The Brink, his account of the financial crisis, the origins of the recession, and his actions as Treasury Secretary. There are two popular books on this topic,: this one and Andrew Ross Sorkin's Too Big To Fail. In this review I'll concentrate on Paulson's. When I write the review on Sorkin's, I'll make some comparisons.
While I followed the financial crisis closely and had strong opinions of what the appropriate government responses were, this book clearly illuminated much more. In both the popular media and the blogosphere, one can find many criticisms of the various programs undertaken by the government to attempt to stem the tide of financial failure that was sweeping through the market. I would speculate that the majority of that criticism comes from conservatives, which is unfortunate. The information seems overwhelming to me that the country barely escaped a second depression. Find any account of the bank failures in the 1930's as they grew from a trickle to a wealth-destroying roaring river, and the parallels are clear. in the thirties, the savings of farmers, individuals, and millionaires alike were destroyed as bank after bank succumbed to "runs". The same thing was well underway in 2007 and 2008, as hundreds of local banks failed, along with much larger IndyMac Bank, Countrywide, and then Bear Stearns and Lehman. We can speculate on which institution would have been next (Morgan Stanley, Wachovia and Merrill Lynch were likely candidates) but action prevented it.
Paulson tells all this in a straightforward style. He provides the inside the beltway view that would be difficult for others, as he recounts discussions with President Bush, who found the required actions completely opposite to his conservative beliefs, with Congressional Committee Chairmen and senior members, and with the various other Executive Branch and Fed officials.
He provides some personal background as well, and as I read the book, I'll admit to being pleasantly surprised to learn how many multi-millionaire investment bankers, like Paulson, grew up in modest circumstances.
There were surprises in those stories. Barney Frank comes off as a total stand-up guy, willing to take the heat. George Bush too, prepared to take on members of his own party who wanted a free-market outcome. Nancy Pelosi shows up as smart, political, and politically savvy. Barrack Obama is smart, informed, helpful until election day, and then unwilling to aid until sworn in. Chris Dodd flip-flops, and John McCain is made out to be a grandstander, who never understood how bad a crisis the country faced. In the private sector, Jamie Dimon of JP Morgan Chase, when push came to shove, was always prepared to do the right thing for the country.
In turn the explanation of the development of TARP, TALF, the monitoring of the markets as each day brought forth more calamity (The signal for me was when the Reserve Fund - one of the oldest, largest and most successful "broke the buck". If money funds devalued, the country would have faced another wave of value destruction the size of the equity elimination of residential real estate. Here again, Paulson recounts what was required to get politicians on board, to face the crisis, and take action. I've long felt that few of our elected officials have any understanding of the economy and market system; this book is and unhappy confirmation of that.
By itself, the play-by-play account of the weekend where Treasury and The Fed tried to come up with a way to save Lehman and prevent deepening crisis is worth the purchase price of the book.
Whether the government did the right thing or not will be the subject of analysis and argument for decades. For those of you who believe TARP, TALF, etc, were huge mistakes, before I cal l you an idiot, I urge you to read this book. If you still think that after reading it, you ARE an idiot.
At the end, Paulson gives his view of what kind of reform is required to regulate giant, multinational financial institutions. I guess in a few years we'll know how close the just past "FINREG" act comes to that.
Enhanced by Zemanta

Comments

Anonymous said…
Good post and this enter helped me alot in my college assignement. Gratefulness you seeking your information.

Popular posts from this blog

Book Review: What Matters Now by Gary Hamel

Interview of Eric Schmidt by Gary Hamel at the MLab dinner tonight. Google's Marissa Mayer and Hal Varian also joined the open dialog about Google's culture and management style, from chaos to arrogance. The video just went up on YouTube. It's quite entertaining. (Photo credit: Wikipedia)Cover of The Future of ManagementMy list of must-read business writers continues to expand.Gary Hamel, however, author of What Matters Now, with the very long subtitle of How to Win in a World of Relentless Change, Ferocious Competition, and Unstoppable Innovation, has been on the list for quite some time.Continuing his thesis on the need for a new approach to management introduced in his prior book The Future of Management, Hamel calls for a complete rethinking of how enterprises are run.

Fundamental to his recommendation is that the practice of management is ossified in a command and control system that is now generations old and needs to be replaced with something that reflects an educat…

7 Ways to Fix Your Gut and Help Your Brain

Author Peter Andrey Smith titled his article on the relationship of the brain to the intestines, and, in particular, the tiny creatures that live in our intestine beautifully: “The tantalizing links between gut microbes and the brain”. If the human brain is the frontier of medical science, the microbiome, those tiny creatures that live in our intestinal tract, is Jupiter. The linkage between what goes on in the gut and the brain is indeed tantalizing, and the subject of research worldwide. There are over 1,000 different kinds of those things living inside us. There are hints that having the wrong mix of gut microbes, or the absence of any particular type, is linked to asthma, irritable bowel syndrome, allergies, depression, Alzheimer’s disease and more. Further, antibiotics, illnesses and other factors can deplete the population. Here are seven things we can do to help keep our little creatures happy and healthy.
Eat the right stuff. There is evidence that the right diet helps keep …

Get REM Sleep; Manage Fear

A good night’s sleep may help you manage fear and risks better.

A study just posted in Journal of Neuroscience describes the importance of a good night’s sleep to controlling strong emotions, especially fear. Previous studies in this area attempted to discover what happens in the brain after a frightful experience.  These prior studies, for example, show how Post-Traumatic Stress Disorder (PTSD) affects sleep. A team at the Rutgers University Center for Molecular and Behavioral Neuroscience, led by Itamar Lerner, has taken a different approach. They wanted to see if there is a relationship between adequate sleep and prevention or management of the brain’s reaction to subsequent stressful events. Research Team Lerner is a Postdoctoral Fellow in sleep research. Along with fellow researchers Neha Sinha-also doing Postdoctoral research-in her case in brain imaging, Shira Lupkin and Alan Tsai, they used new technology that allows mobile tracking of sleep habits over a period of time, not j…