If ever there was a man who had "more answers than questions" - as the cliche on a cliche goes - it's Hank Paulson. But let's give him his due. He's a hard-working guy. He rose to high prominence and stayed there. He's as honest as the day is long (not meant to be a joke that we're writing in winter). His signature is on the currency we all use. You can't beat the career credentials.
In today's news, though, he's making a comeback to tell us all that there are still big financial problems. We know that! While it's not offensive to state the obvious, we need more content than that. We need a bigger message with REASONS and proposed ACTIONS.
Well, Paulson does have talking points. He focuses on Fannie and Freddie and the government's dominance and ownership of residential mortgage lending since the Crisis. Paulson:
"It perplexes me that nothing has been done [by Washington politicians to unwind his own takeover of Fannie and Freddie as Treasury Secretary in 2008]."
He's perplexed that Washington wants to retain government control?! Then Paulson says:
"Every financial crisis has its roots in flawed government policies that lead to excesses in the markets that build up and build up, and then you get a bubble and it bursts."
In his very next breath, Paulson chides a group that is TRYING to reform Fannie and Freddie with an accusation of "OVERSIMPLIFICATION." And his explanation above of the bubble burst was ..... WHAT? Brilliantly deep analysis?! A problem with these Paulson statements is that he's not saying anything. There's no content. It's surface-level thinking and reacting.
We read On the Brink, Paulson's book about the Crisis published in 2010. The book is valuable as historical record. (We recommend it.) What is most striking is the absence of any Paulson thoughts. The man just does not think deeply about the ways of the financial world. A recurring theme of Paulson's in the book is (paraphrase) "I didn't have time to explain to House and Senate members why it was necessary to spend $700 billion and bail out the banks. They just wouldn't have understood. The financial world is too complicated to explain quickly to non-experts."
OUR QUESTION: Well, why not tell us in your book, Mr. Paulson? (In his book, he doesn't like strangers calling him "Hank.") Every book begins with many blank pages. Fill them with that long, complicated explanation that Congress couldn't understand. But there's nothing there. There's no discussion of whether banks are over-leveraged - for example, why is 20:1 leverage okay? If it's not okay, what should it be? Why? (Leverage is just the first and easiest question!)
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