Is Paulson to be trusted, or is this Bush Administration Shock and Awe, 2.0?

What effect will Buffett's $5 billion deal for Goldman have on the bail out.
The interesting fact is he did it before the bail out, does he expect the bail out to go through and make a killing or did he just kill the
bail out?
Could he have done it to save the United States?

Reggie,

I listened to Bernanke argue that they will pay a proper price rather than the market price for the bank debt, this is a spurious argument as any product is only worth what somebody is willing to pay for it.

He says that that they can hold the debt and sell it for a profit when the market stabilizes, but using this argument you can do the following:

1) buy a house valued at $120K for $150K in Nevada, California and rent it out
2) Wait until the market recovers and sell it at a profit
3) the seller of the house now has $30k as a deposit to buy another $120k valued house

Congress was ripping holes in their rescue package yesterday, and as the details emerge I think that more holes will become apparent. This appears to be a shoddy, ill-conceived, piece of legislation designed to bail out their friends in Wall St.

Reggie - definitely one of your best posts. Have either of Obama's or McCain's people contacted you about taking over from Paulson for the next administration.

i just saw something that said Bernanke was quoted as "we must not buy these assets at firesale prices" starting to sound like this whole plan is a package for the taxpayer to wayyy overpay for these assets in order to shore up and bailout all the over legereage and poorly run banks, i think over paying was the plan from the start and was one of the major considerations for paulson including exemption from prosecution....

It's becoming more obvious that this whole thing is not only free money for the banksters in general, but a scam job by Goldman Sachs in particular. Goldman dumps crap on the Treasury, then goes and buys banking assets (Wachovia, Wamu, etc.) for fire-sale prices, then dumps Wachovia, Wamu etc. crap on the Treasury, lather rinse repeat. Warren Buffett is not a good liar, alas. He is in on the deal. At the same time, the Treasury/FDIC is in charge of liquidating those institutions that are not "made men," (guess Lehman and Bear weren't, JPM, MS, GS are), which allows them to sell assets to GS etc. super-cheap just like RTC, which was also an insider scam.

Paulson is a criminal.

Goldman Sachs and JPMorgan now have the authority to become commercial banks that
take in deposits and so all they need to do is buy a commercial bank or dozen in
order to have a network of retail locations. Goldman now has Warren Buffet's
money so they can do it, but Morgan Stanley holds more toxic MBS paper than anyone,
and it is they who should have failed before Bear and Lehman and they are an elephant
in the room.

So we have come full circle from the need to have the retail banks protected from
the instabilities of Wall Street that resulted in the Glass-Steagall Act to the
post-Gramm/Leach/Bliley era where the wall that was breached by GLB's repeal
of G-S now results in Wall Street buying commercial banks in order to shore up Wall
Street's ailing fortunes.

Paulson has said that without a bailout there will be a Depression. This is an election
year, so Congress becomes a wild card in that both Republicans and Democrats want
to have handouts and hides to show the voters ... regardless of Wall Street's
legitimate needs, Congress could easily give 'em too much, too little, too lenient
or too strict. Or in the end Congress could simply be paralyzed owing to a failure
of genuine leadership.

Relating all that to your (and my) pocketbook, uncertainty is the mother's milk
of meltdown, and we have that in spades. Congress is unlikely to get something,
anything passed in time to rescue the markets. That just isn't how the system
works.

What happens then?

The Federal Reserve is a set of private banks with private owners (about 300 owners
... and it is possible to find out who they are, but I won't get into that here).
We are all playing on their field, with their bat, ball and gloves, and they can
kick us off it. And they will take that extreme step if not given what they want
by Congress. Because you see if Congress doesn't pass the "bailout"
package the ones who don't get paid are the owners of the Fed. And if they don't
get paid, they have more attractive investment opportunities in other countries
as well as a good reason to punish this one. And, while we could reconstitute our
financial system on our own and prosper using our own resources, the international
bankers would take steps in retaliation. They could take advantage of the divisions
in society which they carefully nurture in order to pit some Americans against other
Americans so that the country would face ruinous political instability, or they
could simply cause other countries to abhor the U.S. for some reason or another
and to isolate us economically and perhaps ultimately to invade us.

And make no mistake, there have been many historical instances of the U.S. making
herculean efforts to destabilize foreign governments around the world. These were
being done because our leaders were convinced by academics, think tanks and others
that the U.S.'s strategic interests necessitated such actions. The people doing
the convincing come out of Universities. The universities are funded by grants.
The grants come from foundations. The foundations represent wealthy interests (and
the same wealthy interests back political candidates). It's an incestuous little
circle that goes on througout the world.

It has all happened before, it is happening now in various contries of the world,
and it will happen again. Perhaps here.

Meanwhile, companies that operate under the formerly sound principles of reinvestment
of their own profits and that eschew excessive amounts of debt will either be outstripped
by their fellows who do make copious use of capital from elsewhere, or they will
be bought up on the cheap by takeover artists ... more likely, both will occur.
There is no end to the strategies of unfair competition and corporate manipulation,
and the laws covering such actions barely scratch the surface.

So, if Congress said "Make My Day" to the bankers and refused the bailout,
they would basically be saying "yes" first to a depression and then if
we somehow were to weather that, in turn we would face another World War (with the
U.S. playing the role of Germany--and that outcome is already being set up in advance
by fomenting resentment against U.S. policy and presence around the world), or perhaps
another Civil War (red states vs. blue states, most likely--the press has set that
up pretty well also).


Shouldn't we go after those who goofed in jacking up the sub-prime mortgage
lending industry?

Nobody "goofed" ... there is a rigged game that the biggest of the big
boys play ... their time horizons are measured in decades and it's pretty simple
... you make a set of rules, you get the vast majority of people to play by those
rules, then you change the rules and they're all screwed and you take their
money. Keep in mind that it's money the big boys created in the first place,
and they pretty much created it out of nothing. The only limit on what the big boys
do is that if they take too much of the money, it ceases being monetary (a competing
money arises, or a barter economy) ... when that happens in some area, they send
troops in to kick some a**. It will never happen in enough areas simultaneously
to overthrow them.

Kipling got it so right it isn't even funny in this dystopian and ironic bit
of science fiction:

http://www.forgottenfutures.com/game/ff1/abc.htm

I am still in absolute shock that this idea of a no-consequences bad bank bailout was even PROPOSED! It is not only preposterous, it is extremely irresponsible to the taxpayers and sets a horrible precedent. It may even be unconstitutional.

Paulson is not to be trusted and Bernanke is a fool if he thinks that propping up this economy will be good for it in the long-run. It is simply unbelievable that they would even try to get congress to go along with this.

And, things are not even that bad! Banks who were stupid and greedy should get punished and fail. New banks will spout up overnight and start lending. Business will continue. There will not be a "Financial Armageddon".

A lesson in how the rich get richer (at the expense of the taxpayer):

1) Prior to joining Goldman Sachs, Henry Paulson was a member of the White House Domestic Council, serving as Staff Assistant to the President from 1972 to 1973.

2) Henry Paulson joins Goldman-Sachs in 1974. Henry becomes CEO of Goldman-Sachs from 2000-2006 at a time leverage is increasing to 30:1 and trading in mortgage backed securities. Henry exits GS with a net worth in excess of $500M. 30:1 leveraging of mortgage backed securities has been good to Henry.

3) Henry moves on to become Secretary of Treasury for the United States of America.

4) Over the summer of 2008 three of the four biggest Goldman-Sachs Investment Bank competitors evaporate, i.e., Bear Stearns (bought by JP Morgan for $10/share), Lehman Brothers (Bankruptcy), Morgan Stanley (drops to $11.70/share).

5) September 19th of 2008 Henry as Secretary of the Treasury says he needs a $700B non-recourse, 0% interest loan from the Government so he can save the US Economy from a potential meltdown created by highly leveraged instruments called mortgage backed securities. Henry wants no restrictions on what asset class he can buy, and Henry needs the money by the end of the week or it will be financial Armageddon for Wall Street and Main Street. On Capitol Hill 9/23/08 Henry says he wants to create an oversight board with a bunch of smart people from the finance business (his old cronies from Goldman?).

6) September 24th of 2008 Warren Buffett announces he has bought a $5B stake in none other than Goldman-Sachs and has an option for another $5B. All this is done at pre market open pricing. Important Note: Goldman stock was $90 last Thursday the day before Henry announces the $700B plan. As of 9am this morning Goldman stock is $128. A 42% increase in just three market days!!!!!!

Can we all connect the dots now?

1) Who will be the firm Henry Paulson selects to manage the $700B he gets interest free from the government? (hint, GS)

2) Does Henry Paulson have a large position in Goldman-Sachs? (hint, I would bet a big portion of his $500M)

3) Now that Warren Buffett has stepped in will Congress crater and give Henry $700B non-recourse @ 0% interest with no restrictions? (hint, I bet yes)

4) Will those same members of Congress rush out and buy some Goldman-Sachs? (hint, only in another family members name)

5) How much money will Henry, Goldman-Sachs and Warren Buffett make at the expense of the taxpayers of America? (hint, a bunch at no risk)

6) Will Henry Paulson be the savior of the American Economy and be the next Presidential candidate? (hint, based on his first job I would say yes)

The only thing is this theory is so far fetched it does not have the possibility of being true. Its just some crazy guy ranting who doesn’t understand anything about the complex financial markets and their relationship to global banking and etc, etc,etc…….Only a super smart guy like Henry Paulson could ever understand all that stuff. I remember a friend telling me “there is no limit to human greed”. Oh well, this might be a shining example of that friends comments.

Oh, one last question, do you think there is any greed in the prior CEO of Goldman-Sachs bones? (no hint here, you have to figure it out).

Call it mortgage backed securities, call it leveraging up, call it leveraging down, call it WMD’s, call it whatever you want, just understand how the system gets manipulated so the truly rich get richer.

"2) Does Henry Paulson have a large position in Goldman-Sachs? (hint, I would bet a big portion of his $500M) "

No, actually when he came on as treasury he had to sell all his investments. Let's keep to facts gere,

Who voted for these criminals by the way ? Martians ? Americans should take a good look in the mirror. Anyways this country is bankrupt. A good total collapse of the USA will be good for the USA and the rest of the world. People around the world will maybe understand that the USA is a country like any other country. It's a great time to sleight a sacred cow. Start with New-York financial gurus and with American mythology about eternal winners. Not true and never was.

Are you kidding? When the system is gamed you think your vote counts? Those debates about abortion year after year are a DISGUISE to get people thinking those are the real issues.

If the US wanted to, it could easily reduce the cost of competition, lessen prices by aggregation and easily make a free market system that guarantees healthcare for ALL. Instead we're talking about socializing losses on Wall Street! Haha.

You've been gamed. In so many ways - the laundry list would be a mile long. I can provide it, with facts and dates, if you wish. It would make your blood boil.

You should be angry about the system, powerbrokers in the system and behind the scenes (neocons and think tanks like AEI). Tieing to the individual voter is the ultimate in irony.

...on another note, the architect of the Resolution trust was on CNBC and he said it will took 5 years to get everything straight and complete the job, he said this one is much bigger and will take 6+ years. So the sense of urgency is being used by Paulson and co. to make their grab. This is the oldest trick in the book used on the public over and over, in fact, I assure you if Congress hesitates there will be another toppling/failure of some bank to heighten the pace...