Thursday, October 9, 2008
Hank Paulson is fatally conflicted. He should go.
A currency trader friend of mine once tried to cut me off with a quip "I trade currencies, what has the credit crunch got to do with me?". I hope he is reading this article. After viewing the debacle caused by Lehman's failure, Paulson and Bernanke decided it was too risky to let another derivatives-laden firm go under. This time it wasn't even a bank they felt compelled to bail out. AIG was rescued due to its large size and involvement in all kinds of international markets, with the bulk of its business in reinsurance (insuring other insurers). Not surprisingly, the $85 billion loan to AIG prevented a $20 billion loss to Paulson's old firm, Goldman Sachs.