The first does a good job of putting Paulson in perspective by responding to Paulson's recent visit with the mainstream press.
More on the flip.
The first clip is Denninger's response to Paulson's interview on Brokaw's Meet The Press. Denninger inserts his own responses to excerpts of Paulson speaking with Brokaw. In the following, I'll quote, summarize and paraphrase. The clip is much better than my text.
- Paulon says this is not something we wanted to do. "This is something that is very necessary. We've had excesses building up for some time...Bad lending practices, irresponsible borrowing and moving in a chain reaction into the financial institutions, illiquid assets."
Denninger responds with irony. "Yeah, let's talk about that, Hank." ... "But you know, Goldman Sachs (GS) was one of the architects of this, wasn't it. And you were GS's chairman for quite some time. So it seems to me that this movement through the system was something that you should have anticipated. It was something that a lot of other people anticipated....We've been talking about this for over a year, now...Now all of a sudden it gets to a place where there's a crisis. Was that crisis manufactured or was that crisis the natural evolution of things?"
2)Paulson. "We have overcomplexity. Mortgages are now securitized, sliced and diced, put into traunches, sold all over the world."
Denninger. "Yes, indeed we do, and let's talk about how that happened, too. That would be because you at Goldman Sachs along with other titans of industry...set up these structures to do this. It used to be that when you went to get a mortgage...the bank held it on their books until maturity, and that meant they had a very, very strong interest in making sure that you could actually pay them back. They also insisted that ...pay a 20% earnest money deposit to guarantee that the bank would not be the one that at it if something went wrong. But with securitization, that became unimportant. We fueled a huge housing boom. This was not an accident, Hank. This was intentional. And you were one of the people who did it.
Now Frankenstein has woken up and he's stepping on peoples' churches. Now you're surprised that this happened. I don't understand why. You're one of the guys that built this beast.
- Paulson. "This is an urgent matter, and we need to move very quickly."
Denninger. Right.[paraphrase] We have a record going back to Bear Stearns. "There are all kinds of folks that have been screaming about this for over a year. Now all of a sudden we have all this urgency, but this urgency really isn't all that urgent, is it? It was manufactured. It was manufactured by you and Ben Bernanke intentionally sitting on your hands taking a piecemeal, scatter-gun kind of an approach instead of addressing the real problems.
- Paulson. "This is not a position where I like to see the taxpayer, but it is far better than the alternative."
Denninger. "Yes, an alternative that came into potential to be because of your actions, Hank. That's a little bit of a problem, don't you think? First you put the taxpayer in peril, and then you ride to the rescue...Not so seemly sir."
- Paulson. "This is a humbling experience to see so much fragility in our capital markets, and to ask how did we ever get here."
Denninger. Sarcasm and laughter. ..."Well, I haven't seen you eat any humble pie. In fact, what I've seen is that you strut your stuff. You lock yourself in a room with senators and predict the end of the world if you don't get plenary authority to do whatever you'd like. You know, some people would call this terrorism. You created this mess. Now you demand the power to fix it or the world is going to explode. Some people would say, 'That's financial terrorism, Hank.' But you're the treasury secretary. Wouldn't think it would come from someone like you, would you?
- Paulson. "Well, a lot of people are saying a lot of things, Tom. A lot of people would like to rewrite history."
Denninger. "Yeah. A lot of people would like to rewrite history. That would probably be first and foremost you, Mr. Paulson.
Look, I'm normally skeptical of my government, but in this case, I'm outraged. You cashed out over $500 million when in stock and stock options when you came to work with the treasury. You did so without paying one penny of tax. That's allowable under law because we want people to be able to go to work for the government without having to be penalized in having to divest themselves of their assets at the time of having to do so. I understand that.
What I don't understand and refuse to accept is the idea that you can create this kind of a Frankenstein monster of a financial system, an act that clearly perpetrated, that you were an open and willing participant in when you ran Goldman Sachs. You can then sit around with your finger up your butt for the better part of a year. ...
You know it isn't something that's hard to figure out. It's just basic mathematics. When people can't pay their debts back, they default. When you make loans to people based upon the rising price of assets creating a speculative bubble, it's going to end badly. ... You ran Goldman Sachs during a major part of the housing bubble, and during the creation of this credit mess. You are largely responsible for the creation of this monster, and now you wish the taxpayers to grant you plenary authority in order to bail them out.
I don't believe you, Mr. Paulson. Furthermore, the proposal that you sent up to the hill isn't going to cost $700 billion. It's going to cost an infinite amount of money. $700 billion is the amount that you can hold on your balance sheet at any one time. You can launder money through that $700 billion facility as many times as you like. And one must presume that you will.
So you could take the entirety of Freddie's and Fannie's portfolios, for example. $5.3 trillion dollars. Launder it through that facility. 20% of that loss would end up being taxpayers' cost, over one trillion dollars. You could then do it again. You could go through CitiBank's portfolio, Goldman Sachs' portfolio, everybody else's protfolio.
And you have conveniently written into the law that nobody that get's damaged by your choice of which institutions die and which institutions live in this process. None of those people can sue.
We've already had trillions of dollars of wealth wiped out as a direct result of your actions. Fannie and Freddie's preferred and common stock, AIG's preferred and common stock, Lehman Bros, Bear Stearns. How much more do we need to tolerate, Mr. Paulson?
You're asking to be made dictator of the United State's financial system, and I think it's time for people of the United States as well as the congress to stand up and say, 'No más.'"...
That's a pretty long transcription for me. If somebody want's to do video clip #2 in comments, I'll add it up here. Thanks for your patience.
[End update]
The second video clip actually puts forth an alternative proposal in simple terms.