Hank Paulson, the criminally inept Treasury Secretary who shoveled trillions of taxpayer dollars to insolvent banks, and facilitated the grand theft of some near $20 billion dollars from AIG by Goldman Sachs (where he was previously CEO), is now trying to rewrite history.
In today’s Washington Post piece, Paulson states the causes of the economic collapse:
“A significant root cause of the crisis was the combined weight of government policies promoting homeownership; these are apparent in the housing GSEs, the Federal Housing Administration (FHA), the Federal Home Loan Banks, the federal tax deduction for mortgage interest and various state programs. Homeownership was overstimulated to the point that it was unsustainable and dangerous to the broader economy.”
Let us point out that through out the 20th century, interest rates stayed within a range that was realistic relative to economic growth, and that lending standards were based upon the borrowers ability to service that debt. This involved such quaint notions as income, employment, credit history, other debt servicing, and assets. Further, home loans were based on a specific LTV — meaning a down payment was required. Legitimate appraisals were done by banks that actually kept the loans on their books for 10 or 20 years — not 30 days.
None of this finds its way into Paulson’s assessment of the causal factors.
How about Alan Greenspan? One systemic risk that at the root of the crisis was the irresponsible Alan Greenpan. His Federal Reserve’s generational ultra-low rates set the housing spiral in motion. Paulson did not see fit to mention him.
Despite repeated warnings by some of its members, the Fed committed nonfeasance in fulfilling its obligation as regulator of lenders. They allowed a proliferation of irresponsible subprime mortgage underwriters who abdicated all lending standards. If you really want to find the root causes of the crisis, you begin there. Just don’t look for any mention of subprime in Paulson’s commentary.
Astonishingly telling, Paulson makes no mention of the Federal Reserve. Ultra low rates are not worthy of mention either. Don’t go looking for the word “derivatives” in his piece, its not there. Misaligned compensation? Leverage of investment houses? Repeal of Glass Steagall? Federal Pre-emption of state lending rules? Don’t bother looking for these, because you won’t find them.
Perhaps the former US Treasury Secretary can explain how the world had a global boom and bust in housing — including many countries not covered by the FHA or GSEs. How did THAT happen? Indeed, the boom and bust in the US was smaller than that of many other nations. And the FHA/GSE role in that?
Paulson oversaw the greatest transfer of wealth in the history of mankind — from taxpayers to insolvent banks and their bondholders. His commentary is thinly veiled attempt to rewrite what actually occurred, and to shift his own pathetic role from conductor of the theft, to hapless victim of long standing government policy.
If it weren’t such a pathetic attempt at self-exoneration, it would be amusing, Instead, it is merely disgusting.
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Source:
Housing policy must be set on sustainable basis
Hank Paulson
Washington Post, July 30, 2010
http://www.washingtonpost.com/wp-dyn/content/article/2010/07/29/AR2010072905007.html
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