It would also be relevant to mention that his last job was chairman and CEO of Goldman Sachs. I would bet more people in the US know that Obama is a muslim than that Paulson is a Wall Street insider.

Dean, I enjoyed yours & PK's comments re: our need to have SOMEONE address the latest Paulson bailout on its probability for success. I recall reading early on in Chauncey Gardener's first Administration of an idea among GW's team to reduce Gov't. spending abilities of future Presidents by burying us with debt.
This smeels like the last hurrah for what could well be the most successful presidency in our history at accomplishing THEIR true agenda.
It appears we gave them the "right" to abuse us by electing them (& the Congresses who enabled their sophomoric programs. What I don't understand is: Why do they hate their kids & grand-kids so much?

One thing I haven't seen discussed any where is
the Fannie Mae and Freddie Mac bought mortgages
from banks so this debt was taken off of their balance sheet.

what % of mortgages did the investment banks buy up and securitized?
Whose balance sheet were they offsetting?

Is this blank check strictly for housing debt or all wall street debt that
has gone bad?

This is seems to be classic Republican maneuver that Naomi Klien
has talked about.

Too bad American people will learn of this in 20 years no
matter how much we cry in blogs.

After reading dailyKos article,
the current rescue is for "credit default swaps".

So we are rescuing the insurance of bad debts. Oh I am so confused.

No question. This definitely sounds like the guy we need to be handing $700 billion in unmarked bills with no questions asked, no rules, no supervision, no court challenge.

I think it's a great idea to hand the people who both caused and profited staggeringly from this mess a rough $1 Trillion in taxpayer dollars. (I don't care how they label the 'investment,' we will never, ever, ever see that money again.)

If they do this, this is the end of the country. Period. That's it. We're done. We're suddenly collapse-era 3rd world, I dunno, some sort of hypercharged 1970s Ecuador.

El Cid wrote, We're suddenly collapse-era 3rd world, I dunno, some sort of hypercharged 1970s Ecuador.

Actually, the best antecedent occurred a couple years ago in the Dominican Republic, IIRC.

Some massive bank or something failed. Most of the people directly impacted were extremely rich.

So...the government bails out the bank, at crushing expense to the general population.

It does not matter that Paulson exaggerates things. That's part of the job description of the Secretary of Treasury. More important question is "Can Paulson deal with a pile of immense interlocked, incestuous borrowing ?"

If I had known this would happen, I'd have bought Countrywide and Stanley Morgan.

Ooops, someone already did.

Hey Dean, you don't mind me stealing some of your talking points, do you? I mean you make alot of sense since what you're talking about is based on facts. Thank you for this blog!

"... a reduction in the capital requirements ..."

This is justly the weak part of the system, its Achilles' heel: not enough capital in reserve fot the bad days.

"An Achilles’ heel is a fatal weakness in spite of overall strength, actually or potentially leading to downfall."
http://en.wikipedia.org/wiki/Achilles%27_heel

For the overall strength:
"... Paulson commented, "We have the strongest global economy I’ve seen in my business lifetime.""

For the downfall: that's what we are seeing now, ... and for some time to come !

To be fair, when the actions of Goldman Sachs' trades, when he still had a hand in its affairs, show that he probably did clearly did see the housing buble, his statements as Secretary of the Treasury simply indicate that he was trying to talk down the credit crisis. Should he have done that? That is something on which reasonable people can disagree.

But I think that Sec. Paulson's attempt to talk down the crisis was the responsible thing to do, when at the moment that he did it, neither the Fed or the Treasury where prepared to intervene in the financial markets in a way and on the scale to cope with credit crisis. At that point, talk is all Sec. Paulson could do.

In addition to many of the concerns listed here and elsewhere, I have three concerns that have not received much, if any, attention.

First, if anyone at a securitizing firm, let’s call the fictitious firm Silverman, knew of fraudulent activity anywhere in the pipeline, would the investor that purchased the security have legal recourse against Silverman? Could the hedge funds and other investors that purchased Silverman mortgage backed securities force them to purchase the securities back at par because they had knowledge of fraudulent activities? Would this problem disappear if Treasury purchased these securities at inflated prices from everyone?

Second, did Silverman market these securities to investors while taking opposite positions for the institution? As we saw with auction rate securities, some investment banks were selling the securities to customers while the banks liquidated their own positions. Once that was apparent, the investment banks were forced to buy the securities back due to the misrepresentation. So, did Silverman sell these securities to investors at the same time as they were shorting, liquidating, or purchasing CDSs on these same securities? If so, would the investor have legal recourse?

Third, would banks and other financial institutions be allowed to act as conduits to hedge funds selling these securities? If the bill had an equity position or limits on executive compensation, the conduit scenario would be less likely and would therefore be opposed if the intention was to include hedge funds (or any investor anywhere).

It seems like Paulson could have chosen a much more efficient path to achieve the same result. This inefficient path may produce the same result at the end of the day but cost the taxpayer three times as much. Could there be any motivation to choose the inefficient path?

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