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On the Brink: Inside the Race to Stop the Collapse of the Global Financial System Hardcover – February 1, 2010
Purchase options and add-ons
- Print length496 pages
- LanguageEnglish
- PublisherBusiness Plus
- Publication dateFebruary 1, 2010
- Dimensions6.5 x 2 x 9.25 inches
- ISBN-100446561932
- ISBN-13978-0446561938
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Amazon.com Review
But Paulson had no idea that a year later, he would find himself at the very epicenter of the world's most cataclysmic financial crisis since the Great Depression. Major institutions including Bear Stearns, Fannie Mae, Freddie Mac, Lehman Brothers, AIG, Merrill Lynch, and Citigroup, among others-all steeped in rich, longstanding tradition-literally teetered at the edge of collapse. Panic ensnared international markets. Worst of all, the credit crisis spread to all parts of the U.S. economy and grew more ominous with each passing day, destroying jobs across America and undermining the financial security millions of families had spent their lifetimes building.
This was truly a once-in-a-lifetime economic nightmare. Events no one had thought possible were happening in quick succession, and people all over the globe were terrified that the continuing downward spiral would bring unprecedented chaos. All eyes turned to the United States Treasury Secretary to avert the disaster.
This, then, is Hank Paulson's first-person account. From the man who was in the very middle of this perfect economic storm, On the Brink is Paulson's fast-paced retelling of the key decisions that had to be made with lightning speed. Paulson puts the reader in the room for all the intense moments as he addressed urgent market conditions, weighed critical decisions, and debated policy and economic considerations with of all the notable players-including the CEOs of top Wall Street firms as well as Ben Bernanke, Timothy Geithner, Sheila Bair, Nancy Pelosi, Barney Frank, presidential candidates Barack Obama and John McCain, and then-President George W. Bush.
More than an account about numbers and credit risks gone bad, On the Brink is an extraordinary story about people and politics-all brought together during the world's impending financial Armageddon.
Read the Author's Note from On the Brink
The pace of events during the financial crisis of 2008 was truly breathtaking. In this book, I have done my best to describe my actions and the thinking behind them during that time, and to convey the breakneck speed at which events were happening all around us.
I believe the most important part of this story is the way Ben Bernanke, Tim Geithner, and I worked as a team through the worst financial crisis since the Great Depression. There can't be many other examples of economic leaders managing a crisis who had as much trust in one another as we did. Our partnership proved to be an enormous asset during an incredibly difficult period. But at the same time, this is my story, and as hard as I have tried to reflect the contributions made by everyone involved, it is primarily about my work and that of my talented and dedicated team at Treasury.
--Henry M. Paulson
Amazon Interview: Henry M. Paulson on On the Brink
We spoke with Henry M. Paulson in late January 2010, just before the release of On the Brink. You can listen to parts one and two of the Omnivoracious Podcast of the interview, and read a full transcript, in addition to these excerpts:
Amazon.com: You accepted the job as Treasury secretary in 2006, with some reluctance. Did you have any idea what you were getting into?
Paulson: I had a pretty clear idea that there would be a credit crisis sometime when I was in Washington. And I told the president I thought there'd be one, and the first major meeting I had with him I spent just talking about that topic. But I did not anticipate a crisis of the magnitude we faced--didn't anticipate that at all--and I certainly was bordering on naive in my understanding of the regulatory powers and authorities in Washington.
Amazon.com: You talked about [Ben] Bernanke's great knowledge of history. How much of a guide could history be?
Paulson: I can answer that two ways. First of all, history is a guide in one very real sense: that if you let the financial system collapse, and don't do enough to stave off disaster, the people who are going to suffer, the innocent victims, are going to be the American people. It's not going to be the banks, or the financial sector. So you need to do everything you can to put out the fire before it gets out of control. I think to that extent history was an important guide.
Otherwise, there wasn't much you could learn from history. That's a big lesson, but we were dealing with a financial system and markets very different from what had existed many years ago. Huge concentration in the industry, so if you had two or three firms go down in succession you'd have a domino effect. The whole system could collapse, and it wouldn't take much to have unemployment levels equal to what we had at the Great Depression, and it could happen very quickly. And we didn't have the tools we needed to work with. The regulatory system hadn't been updated since the Great Depression, essentially; the regulatory authorities hadn't. We didn't have the authorities for dealing with major non-banks, and winding them down. So in many ways what were doing was we were dealing with--I said in the book--duct tape and baling wire. We were making do with the authorities we had, which were woefully inadequate.
Amazon.com: And scrambling to get more authories.
Paulson: And scrambling to get more authorities. And in many ways this book is the story of the collision of politics and markets, and it's the story of a race against time to get more authorities. And I think one of the things that really comes through in the book is all of the different elements of the crisis that were coming at us simultaneously.
You could just see it. We could see it and it was one of the most frustrating--when I look at the things I could have done better, there were a lot of them and they come out in the book, but the communications challenges were huge. I mean, I sat there when the capital markets froze, before we went to Congress, and the money markets weren't working, and I just tried to think about how to explain this. Because I knew--I was seeing major, blue-chip industrial companies that were having trouble raising financing, so I knew with $3.4 trillion of money market funds, and with everything that was just getting ready to break apart, that if the system had collapsed there'd be thousands and thousands and thousands of mainstream industrial companies--middle-sized companies, large companies--that wouldn't be able to raise their short-term funding, finance their inventories, pay their people. People wouldn't have been able to pay their bills. This would have rippled through the economy. We would then have had--well, today we have over 10% unemployment. That's terrible. And that's after everything we've done. If the system had collapsed, when we were on the brink, unemployement easily could have been at the 25% level that we saw at the Great Depression, and the value destruction--much greater than we've had in terms of home prices and in terms of people's savings accounts and stock portfolios and so on.
Amazon.com: And now it looks like 2010 is going to be the year that the Obama administration tackles financial reform. In the last section of your book you mention some lessons that you took out of the crisis.
Paulson: Yeah, this is absolutely critical. And I am not shocked but very unhappy we don't have this yet, because people in this country are angry. Now they're very angry about bonuses and compensation levels on Wall Street, and rightfully so, after everything that's been done to save Wall Street. But what they should be angry about is that we have a system that made this necessary. And so what we need to do is we need to channel some of that anger toward fixing the system so never again do we have major financial institutions that are too big to fail.
Amazon.com: And do you worry that the further we get from the crisis the harder it will be to make those necessary reforms?
Paulson: Of course I do. The thing I worry about the most is I don't want another Treasury secretary to ever be sitting there like I was, without the tools and authorities you need to protect our country, protect our economy, and protect the people. It's a helpless feeling and it's a terrible feeling, and we should never be in this place. Our authorities need to be updated, our financial regulatory structure needs to be updated, and I'm optimistic about the future if we do this.
If we don't, we will have another crisis. You always do. That's the history of mankind. If you go back, as long as we've had banks and financial institutions, there have been excesses, no matter how hard you try to avoid them, and there are going to be financial crises, and we need the tools in place and the regulatory system in place to be able to have a better visibility into what's going on and then be able to put out the fire when it starts, without costing the American people as much as this one did.
Read the full interview.
From Publishers Weekly
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About the Author
Product details
- Publisher : Business Plus; 1st edition (February 1, 2010)
- Language : English
- Hardcover : 496 pages
- ISBN-10 : 0446561932
- ISBN-13 : 978-0446561938
- Item Weight : 1.73 pounds
- Dimensions : 6.5 x 2 x 9.25 inches
- Best Sellers Rank: #631,709 in Books (See Top 100 in Books)
- #338 in Government & Business
- #1,283 in Economic History (Books)
- #2,360 in History & Theory of Politics
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About the author
Henry M. Paulson, Jr. served under President George W. Bush as the 74th Secretary of the Treasury from June 2006 until January 2009. Before coming to Treasury, Paulson was Chairman and Chief Executive Officer of Goldman Sachs since the firm's initial public offering in 1999. He joined Goldman Sachs Chicago Office in 1974 and rose through the ranks holding several positions including, Managing Partner of the firm's Chicago office, Co-head of the firm's investment Banking Division, President and Chief Operating Officer, and Co-Senior partner.
Prior to joining Goldman Sachs, Paulson was a member of the White House Domestic Council, serving as Staff Assistant to the President from 1972 to 1973, and as Staff Assistant to the Assistant Secretary of Defense at the Pentagon from 1970 to 1972.
Paulson graduated from Dartmouth in 1968, where he majored in English, was a member of Phi Beta Kappa, and an All Ivy, All East football player. He received an M.B.A. from Harvard in 1970.
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As a participant in and observer of the greatest economic crisis since the Great Depression, one of the things I yearn for is more color behind what <em>specifically and mechanically </em>caused the events of September 2008. I believe a worldview is required that can make heads or tails of the TARP, specifically, and overall government response, generally. I am still fine-tuning my beliefs about what exactly should have been the proper response. As is often the case, there is an abundance of simplicity being applied to this mess that is neither intelligible nor useful in this dialogue. There is also an abundance of wicked ideology being applied that is dangerous and at the heart of why I feel this project is so important. It is easy for those of my market-driven, conservative ideology to dismiss everything Hank Paulson did as "statist". It is easy for a vulgar writer of a rock n' roll magazine to determine that Paulson was a tool of a vast Goldman Sachs conspiracy to take over the solar system. I do not know which one of the two mind-numbingly retarded conclusions are more ridiculous, but I do know that readers of this review hoping that I will paint Paulson as the major antagonist of this drama will be very disappointed. And as for the Oliver Stone-nutters, well, let's face it - you probably don't read me anyways. Not for long.
The vast majority of the first few chapters are loaded with ammunition for what has long been a major thesis of mine about the crisis: <em>We are being naive to minimize the role Fannie and Freddie played in causing it.</em> I learned more from Paulson's book about the specific mechancis behind Fannie and Freddie's dreadful role in our financial crisis, and I actually mean a lot more here than merely the abysmal social policy the two institutions represented. I also mean what the real connection was behind the placement of those two parasite organizations into government conservatorship in early September and the subsequent failure of Lehman Brothers and AIG in mid-September. I really do not know where to start. If Fannie and Freddie had never existed, ever, I very much doubt that any housing bubble would have ever taken place, and therefore no housing implosion would have taken place. And once these two disastrous entities were allowed to exist, if they had not been continually built up by the powerful Congressmen who were being paid off by them, I do not believe the crisis would have ever taken place. And if once these powerful institutions had achieved their sweetheart status in our nation's capital they had then been forced to compete with private institutions for capital (apart from the insidious "implicit" guarantee of government money), I am certain that the crisis would have been averted. And if once they had functioned with total monopoly status for decades, governmental oversight had reined them in, muting the sociopathic forces in Congress that called for them to expand their lending practices more and more, I am sure the disaster would not have taken place. But by September of 2008, we were so deep into this pile of you-know-what, that it is hard to see what the options were. The placement of Fannie and Freddie into conservatorship in September of 2008 is hardly controversial. What I am offended by is that these beasts were ever given the right to life. And what I am unbelievably offended by is that now, eighteen months after the initial action to seize these companies (which already existed by government charter and had already indebted themselves to the tune of trillions of dollars with an "implicit government guarantee"), policymakers continue to prop up these dysfunctional entities, adding more funds (unlimited funds, to be exact), rather than selling them off bit by bit and setting the stage for fully-privatized models to assume control. It can be done, and it must be done, but to do so means letting go of one of the most religious tenets of government policy of my lifetime: <em>the role of government in setting social policy through manipulation of the housing market.</em> Anyone who reads Paulson's early chapters on Fannie and Freddie will come away disgusted, not by what happened in July and then September of 2008, but by the entire Fannie/Freddie fiasco.
I told my wife when reading Paulson's book that I was waiting to read one of these many books that feature a play-by play of the week of September 12, 2008 without feeling physically ill. Paulson's book kept the tradition alive, for indeed, that horrfic nightmare of a week was told in passionate detail by Paulson, and my visceral reaction remains one of genuine physical discomfort. I have to wait until my own expanded commentary of the crisis to elaborate, but I truly believe that the obsession many of us have in criticizing the TARP is incredibly misguided. Some of the more cartoonish commentaries on the crisis that have said, "there wasn't really a crisis; we all would have been okay; the whole thing was made up" - reflect an incredible ignorance about the global financial system. I want to believe somewhere deep down inside of me that Paulson and his crew calculated that <em>some company </em>was going to have to die, and that the financial system's medicine would need to begin. But I don't really believe that. I think they let Lehman die because they actually believed the damage would be contained, and when they saw what was happening to the worldwide financial system when it did, the panic bells began ringing without a break. We are never going to know what would have happened had no version of TARP been passed. I do not believe that the motivation of the Treasury Secretary was to expand the role of government in our lives; I have absolutely no doubt in my mind that he believed (and still believes) that there was no choice at all if we were to avoid financial armageddon. I do not believe him that at the time he argued before Congress for the imperative need of TARP, his intention was for it to be used to purchase toxic assets, and then within a week or two of its passing realized that capital injections into the financial firms was the more prudent way to go. The reality is that I think they knew all along that this is what the TARP was going to be. The chapter in which Paulson tells us of McCain calling the emergency meeting in D.C. to discuss TARP makes me almost glad that he was not elected President (and amused at how badly his political strategists were out-maneuvered). The attempt by lawmakers to add on their particular agenda item to the bill paints the political process at its worst possible light. And most of all, the mere history of the passage of TARP leaves a breathing, thinking human being absolutely mystified at the political environment we are in today. The Democrats do not let a day go by without villainizing the horrors of the Wall Street bailouts, yet the reality is that this was a bill fervently supported by Nancy Pelosi, Barack Obama, Barney Frank, Charles Schumer, Hilary Clinton, John Kerry, Chris Dodd, and basically every single Demoractic lawmaker of consequence from top to bottom. Somehow, some way, the Democrats have managed to sponsor, rally behind, and pass the infamous bill known as TARP, and simultaneously condemn it, lambast it, and rhetorically crush it, all with the media as a willing accomplice to their crime.
99% of what I intend to say about TARP has to do with why it never should have been necessary to begin with (because yes, government created this crisis), and why it should never be allowed to create the aftermath it is creating (things of the "do not let a crisis go to waste" variety). Only 1% of my thoughts on TARP have to do with how Congressmen and women voted that day. I believe that the attempts by leftist progressives to use this bill as an excuse to further the role of government in the nation's financial systems is hardly a surprising consequence. And as Jonah Goldberg has said, perhaps this "crap sandwich" should have caused some lawmakers to vote differently. But it is rather short-sighted to leave it there. Had the credit markets broken altogether, the country's financial system would today be fully and completely nationalized. The efforts of conservatives who value individual liberty need to be focused on never, ever again allowing the perfect storm of government policy to create such a crisis. It can be done. The paradigm that Paulson and his men imperfectly navigated through in the fall of 2008 was not the paradigm we want to live in. Let's change that paradigm, and more intelligently understand the financial crisis we went through.
Ultimately, the idea that TARP was a bailout of Wall Street is pure, unadulterated nonsense. But that rhetoric is set in stone, and nothing is going to change the national perception at this point. The nation's financial companies could have been allowed to go into bankruptcy, as many surely would have (deservedly so). Depositors with over $100,000 of cash would have lost their funds, but depositor losses would look like a walk in the park compared to the losses of bondholders. And that, my friends, is what the bailouts of 2008 were about - a bailout of the debtholders of the world's financial system. Why this was the case, and what it means, will be explained in my ongoing commentary. Why Paulson and others were willing to let TARP be branded as a bailout of Wall Street firms when, in fact, the common equity of those firms was decimated, is a true mystery. The vast majority of Wall Street executives actually involved in running their firms into the ground were long gone by September of 2008. The largest bailouts had nothing to do with Wall Street firms at all, but were in fact an insurer (AIG) and two mortgage companies (Fannie and Freddie). Every one of the nine firms that took the initial draft of TARP money have paid it back at <em>huge, huge</em> profits to the taxpayers. What TARP did in hindsight was not to bailout Wall Street but actually allow it to be far more villainized in the American conscience than it ever needed to be. The farming industry which has been pillaging the American taxpayer in ways that would make Wall Street blush for three decades is actually considered a force of heroism. The automakers may be scoffed at, but they are hardly hated. TARP made all this possible. <em>And I suppose what I would suggest to my readers is that TARP was the worst thing that ever happened to Wall Street, not the best. </em>But as for the vote that took place in September of 2008 (and again a few days later in early October), I will not condemn the lawmakers who voted for the legislation that their Treasury Secretary told them would be necessary to save the system from collapse. The situation warrants more nuance than many are capable of granting it.
Paulson's book is shocking in the extent it goes to at portraying George W. Bush as engaged, thoughtful, and courageous. Paulson surely knows Bush would have made an easy sacrifical lamb, and he went the exact opposite direction. With no benefit to Paulson whatsoever, I find that intriguing. The book is anything but defensive, and in fact, he makes it very clear in the book's powerful concluding chapters that he does not apologize for how he formulated the government response to the crisis. I believe Secretary Paulson and I would have vast ideological differences if I were ever allowed to dialogue with him directly about this crisis. But I hold him in high regard as a man and as a patriot. I do not question his intentions. You will not either if you give his book a fair read. I commend it to you wholeheartedly.
Thus Hank Paulson summarizes, in the Afterword, the major challenges he faced as Secretary of the Treasury, a post he assumed on July 10, 2006 and left on January 16, 2009. And this does not mention other institutions that would have failed had they not been propped up (GE Capital, Chrysler, GM, and the entire money market industry after the Reserve Primary Fund broke the buck).
In the recently released "Bailout: an inside account of how Washington abandoned Main Street while rescuing Wall Street", Neil Barofsky, the former Special Inspector General in Charge of Oversight of TARP, details his efforts to constrain the Geithner Treasury from unconditional dispersal of hundreds of billions of TARP funds to the largest banks with no oversight. Former FDIC Chief Sheila Bair recently said of Geithner, "Tim seemed to view his job as protecting Citigroup from me, when he should have been worried about protecting the taxpayers from Citi." While Geithner did much to accelerate what the New York Times called a "no-strings windfall to bankers", the first $350 billion was dispersed under Paulson. Was he a hero who kept the world from falling over the "brink", or was he just rescuing his inept investment banker buddies and sending the tab to the taxpayer as some would contend? What evidence does On the Brink offer?
One indeed can make the case that Paulson was the right man at the right time since only a former CEO of Goldman Sachs had the necessary knowledge of financial markets and the professional gravitas to demand attention from the likes of Jamie Dimon of JP Morgan, John Mack from Morgan Stanley, Lloyd Blankfein from Goldman Sachs, Vikram Pandit from Citigroup, John Thain from (then) Merrill Lynch, Brady Dougan from Credit Suisse, and Robert Kelly from Bank of New York Mellon.
But, one can also argue that, having drunk the Goldman Sachs kool-aid, Paulson saw only one response to the crisis - save the big banks, everything is secondary. As the crisis unfolds, it seems that Paulson and his team move heaven and earth to accommodate financial institutions but underwater homeowners are given short shrift and then only to get more money for the banks: "...devising one [a mortage mitigation plan] would be critical to getting congressional approval to release the final tranche of TARP."
Paulson summarizes, "As first responders to an unprecedented crisis that threatened the destruction of the modern financial system, we had little choice [but to take the actions they did]." He repeatedly invokes images of "market panic", "grave distress throughout the world", "financial catastrophe", "serious risk", "the world falling apart", "all hell [breaking] loose", "[threats to] the entire financial system", etc, etc as justification for his actions.
But, throughout this crisis, many members of Congress asked Paulson to delineate the consequences of NOT bailing out the big banks, and, for the most part, he seems to duck the issue then and now. In one instance, he explains, "[Florida representative Adam Putnam] suggested that I needed to tell people more explicitly how bad it would be if the financial system collapsed....but scaring the public to win support would only make things worse economically." And, "...this dilemma haunted me throughout the crisis - how to make the public understand the grave situation we faced without inflaming the markets even further."
But what about now, in this Copyright 2010 book? Wasn't this the great opportunity to explain the Sum of All Fears and spell out how the dominoes could have fallen? The only clue we get here is that hundreds of billions were dispersed so that credit would continue to flow ("..if credit stopped flowing, businesses would shut down across America and many, many jobs would be lost."). But, you can't help but hear Eartha Kitt singing "Santa Baby" as you read about the fortune lavished on the big banks who promptly sat on the funds and provided no sugar for Daddy.
Whether you agree with his actions or not, ultimately the nation owes a debt of gratitude to Paulson for stabilizing a chaotic situation and you have to admire his fortitude in dealing with wave after wave of staggering problems. However, given the strong residue of resentment that still exists over how TARP (and related programs) were handled, On the Brink represents a missed opportunity to dispel some of that resentment.
A final note: the Afterword makes for interesting reading as Paulson lists his recommended actions for preventing another similar crisis. Guess how many of his recommendations have been implemented?
Top reviews from other countries
However, whereas Sorkin is on the outside looking in, Hank Paulson was on the inside, at the very epicentre of the Government's frantic efforts to find solutions for a seemingly impossible and fast moving series of catastrophic losses in almost every major financial institution and many Blue Chip corporations. Mr Paulson is able to provide a 'fly on the wall' account of not only the fiscal machinations but also an insight into the feverish bi-party negotiations on Capitol Hill for new legislation to facilitate his rescue plans. In fact the two books compliment each other and together provide an excellent rounded account of one of the most critical moments we are likely never to see again - it is hoped.
Along with Ben Bernanke, Chairman of the Federal Reserve, Tim Geithner, President Reserve Bank of New York, Sheila Blair, Chairman of the FDIC and their departmental teams, Hank Paulson worked literally day and night, 7 days a week,for 6 months in 2008 to avert the threatening financial armageddon. And succeed they did but not without quite a few hiccups, confrontations, arguments and near meltdowns. That they succeeded was a tribute to those involved, which should be universally lauded and also an endorsement of the US characteristic that guarantees bi-partisanship in the face of trouble. God Bless America.
This book also details the very important role played by President Bush in recognising and understanding the severity of this very complex set of economic woes, and despite the correctional remedies being contrary to his political beliefs and policies, nevertheless gave his full support and authority to bringing about the urgently required solutions.
Through his writings Hank Paulson comes over as an likeable person, good family man, outstanding Banker, inspirational leader, and exemplary Servant of his country. Without his dogged resolve and gritty determination it is highly probable that global economy would now be in a sorry state.
A must buy book.
またビジネスマンとしては規模は違うもののアメリカ本社の様々の部門の利害に翻弄されるプレッシャーの中で仕事をやっつける際の”気概”を学ぶことができたと思っている。どしても自慢話のように取れてしまう部分は多々あるが(特に早くから中国の要人と人脈を構築した点など)、我が国の政治家と対比すればそんな処も笑って読み進められるのではないだろうか。
Solche Leute gibt's bei uns nicht.