The Truth About Paulson

Back when he worked for Goldman Sachs, he testified before Congress that getting rid of the 12:1 leverage laws for financial institutions would be a good thing. This law had been in place for a long time to protect from overleveraging. Essentially the more leverage a person or business is, the smaller cushion there is for a downturn. Sure in good times, it ramps up profits, but if things turn sour you have a bankruptcy in the making. After the law was passed to get rid of limits on leverage. Many of the financial institutions that you see everyday in the news ramped up their leverage to 40 and 50:1. This meant that even a miniscule 2 to 2.5% move to the negative would jeopardize the financial staility of these companies. Thus, when defaults started to roll in on mortgages that never should have been lended, the companies were in deep %#&*! Especially given the fact that they were heavy into unregulated financial deritives (that were once again mainly used by firms like ......Goldman Sachs and the other big investment brokerage houses).

So what does Paulson do? He rides in to save them by lying to the American public with the infamous bailout bill. The $700 million bill was supposed to be used to buy up toxic securities to clear out the bad debt. How has it been used? Well $125 billion has gone to large banks with basically no strings attached. In fact, many of these same banks are still paying out large bonuses to their employees. More has been used to set up lines of credit with many emerging market countries. However, not one penny has been used as Paulson sold it to CONgress and America. He's used most so far to bailout his former coworkers so they can keep their nice lifestyles. Most people would consider this a crime worthy of a long time in jail. America needs to rise up and demand culpability for everyone involved in this lynching of the future of America. Hopefully, the damage will be limited to what we've seen so far (which is massive), but it likely is just the start.

For what it's worth, Bernanke, Congress, Bush, and Wall Street are all largely to blame also, but Paulson is the posterchild.