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Paulson's Revealing Phone Records
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While the economy was crashing last year, exclusively analyzed telephone records reveal the ex-Treasury secretary was talking far more to Obama and Geithner than Bush and McCain.
Timothy Geithner’s just-released phone records caused quite a stir last week—specifically, the absurdly small Wall Street circle Obama’s Treasury secretary has consulted during one of the most critical economic periods in U.S. history. Yet as Winston Churchill once said, “The farther backward you can look, the farther forward you are likely to see.” Understanding the situation we’re now facing requires an examination of how things went down among him, former Treasury Secretary Hank Paulson, and the most influential financial titans on the planet, during the bailout and bank landscape carve-out period.
So, I spent a fair portion of the weekend digging through 415 pages of Paulson’s calendar—which has received almost no scrutiny compared with the Geithner logs—during the seven most critical financial crisis months (March, 2008 and August 2008 through January 2009). August through October 2008 were particularly packed, encompassing 237 pages worth of calls. Categorizing these records by incoming and outgoing, individual and conference, calls per day and month, during that crucial period, I also crosschecked them against Geithner’s calendar.
Bush’s Treasury secretary made almost twice as many outgoing calls to his eventual successor as Fed Chairman Ben Bernanke.
The information doesn’t come in ready-made easy-to-digest classifications, but combing the logs reveals four interesting facts:
1) Paulson and Geithner Were Tight.
Sure, you’d expect close contact during a crisis, but we’re talking really tight. During those seven months, the two chatted 416 times compared to the 268 times Paulson spoke with Federal Reserve Chairman Ben Bernanke, who had final approval on all the mergers and bank holding company designations.
Even the nature of the Paulson-Geithner records indicates just who Paulson's “go-to” guy really was: Bush’s Treasury secretary made almost twice as many outgoing calls to his eventual successor (279) as to Bernanke (150). With Geithner at the helm of the New York Fed, it extended $4 trillion, or 76 percent of the $5.3 trillion of Fed facilities, cheap loans, and other monies made available to the banking industry at the height of the fall crisis. While the Fed refuses to disclose the exact nature of collateral and recipients of that aid, we now know that there were almost no calls to smaller bank leaders during the crisis.
2) Obama Was Fully Engaged With Paulson During the 2008 Campaign
That the meltdown dovetailed with a presidential general election was extraordinary; equally extraordinary was how much both candidates, then-Senator Barack Obama and Senator John McCain, were interacting directly with Paulson, in comparison with his boss, President George W. Bush. And between the former pair, it was the candidate from the opposition party, Obama, who was far more plugged-in, engaging in 26 direct calls with Paulson, compared with 14 for McCain. (For comparison, Bush logged in 24 direct calls, plus 27 conference calls or meetings). Paulson placed more than twice as many individual outgoing calls to Obama (14) as to President Bush (6).
After Obama was elected, his conversations with Paulson dropped off dramatically. Clearly, he was then engaging with his own team.
• Simon Johnson: Geithner’s Telephone Travesty 3) Paulson’s Big Three: Goldman, Morgan Stanley, BofA
As bank monikers and sizes were changing, Paulson gave the most access to the trio of Lloyd Blankfein, who succeeded him as Goldman Sachs CEO, Morgan Stanley CEO John Mack and Bank of America CEO Ken Lewis. Not shocking given the frenzied, desperate times; Blankfein and Mack were trying to transform their investment banks into bank holding companies, to gain greater access to federal capital. Lewis, of course, was dealing with the whole Merrill Lynch merger issue. (With that out of the way, Geithner’s calls to Lewis dropped considerably.)
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Lloyd Grove is editor at large for The Daily Beast. He is also a frequent contributor to New York magazine and was a contributing editor for Condé Nast Portfolio. He wrote a gossip column for the New York Daily News from 2003 to 2006. Prior to that, he wrote the Reliable Source column for the Washington Post, where he spent 23 years covering politics, the media, and other subjects.
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Jacob Bernstein is a senior reporter at The Daily Beast. Previously, he was a features writer at WWD and W Magazine. He has also written for New York magazine, Paper, and The Huffington Post.
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Jeff Madrick is a contributor to the New York Review of Books and a former economics columnist for the New York Times. He is editor of Challenge Magazine, visiting professor of humanities at Cooper Union, and senior fellow at the New School's Schwartz Center for Economic Policy Analysis. He is the author of Taking America, The End of Affluence (Random House) and The Case for Big Government.
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Nomi Prins is author of It Takes a Pillage: Behind the Bonuses, Bailouts, and Backroom Deals from Washington to Wall Street (Wiley, September, 2009). Before becoming a journalist, she worked on Wall Street as a managing director at Goldman Sachs, and running the international analytics group at Bear Stearns in London.
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Nomi Prins is author of It Takes a Pillage: Behind the Bonuses, Bailouts, and Backroom Deals from Washington to Wall Street (Wiley, September, 2009). Before becoming a journalist, she worked on Wall Street as a managing director at Goldman Sachs, and running the international analytics group at Bear Stearns in London.
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Nomi Prins is author of It Takes a Pillage: Behind the Bonuses, Bailouts, and Backroom Deals from Washington to Wall Street (Wiley, September, 2009). Before becoming a journalist, she worked on Wall Street as a managing director at Goldman Sachs, and running the international analytics group at Bear Stearns in London.
Like common criminals, they break into our houses and take everything of value from us and here is Paulson, holding the flashlight. Oh, but wait, they shoot us on the way out the door.
What a bunch of conniving, scheming, thieving pirates, all sitting up there on their golden finance toilet thrones plotting with our own gov on how to steal from us. If this isn't dereliction of duty, then let all the criminals out today! It is time to arrest these *inside* traders...
Genni, let's arrest em and then hang em high!
OOps! Sorry, we are talking about the President and all of his men.
Looks like it is getting harder and harder to put the gameplan
together again.
First they have us thinking this has gotta be an R vs D issue.
Let's confuse the country and have em squabble over things
like "immigration, healthcare, a little war here, a little terrorism
there." Let's keep em bellyaching, and while they are watching
the shells, the pea has already been slipped off the table.
By the time anyone figures the game out, these old boys
will have cleaned us out!
I, too, am not into the D vs. R issue when it comes to the matter of this financial mess. Not that I am a brilliant banker or anything, but my feeling is that they all should have been allowed to tank, let the chips fall where they may. And yes, did see It's a Wonderful Life....
I can't be convinced that GREED isn't mainly the reason our country is in this mess. I can't be convinced that BOTH parties aren't responsible. Many people are willing to peel grapes if necessary to make a living.
On this, I'm with you, Yarrow.
Seriously, the hatred is unjustified. Are the Feds and Wall street too close? Yes. Could crisis have been handled better? yeh.
Buts its absurd to blame the Fed and wall street for every single wrong that happened.
Its not unreasonable that the group consulted is small. Its a bloody crisis. You cant get everyone's opinions, then do analysis for all of it in time. You choose the people with the most experience, capability and hope the best.
Whatever wrongs you feel they did, saving the banks prevented a financial collapse. Global financial economic theory is tough, requiring a lot of judgment calls. To be frank your American just dot understand enough to be making any opinion about whether what was done is right or wrong. Almost no economist, whether private or acadamic think it was wrong to save the banks. Not doing it would ave been a lot worse for everyone. That part is apparent to almost everyone who studied economics.
And yet popular rage is to be vented and its always easy to blame others.
'scuse me...why do they get to benefit with huge profits, runaway bonuses and risk taking to the absurd like there is no tomorrow, then when the proverbial shit hits the fan, tomorrow does arrive, they get bailed out?? Plus, there are absolutely no consequences at all. Even children have consequences when they are naughty. It is unforgivable. No phone calls. Even one is too many. The stench of inbreeding is palpable and sickening.
So many on this thread act like Wall Street and the Fed having been doing the same thing for the last 30years! Reagan opened this quagmire and last September was the culmination of those policies. Yes, it sucks that Paulson and the gang had to do these things to keep the worlds financial systems above water, and no it's not fair, but what else would you have had them do? The Dow passed 10,000 today and that's as a direct result to what they did a year ago. This is the free market system Rethugs always espouse at work. That's why the system will never be fair and will always crap on the little guy. And that's all of us who are not banking execs if you didn't know.
Genni2002 - lx-Isaac has a valid point or two. Maybe not the only valid points, but some of them.
It wasn't all Wall Street and the Feds. Some of it was the people of the United States themselves. Buying houses on speculation, borrowing money on their houses to buy cool stuff that they just had to have, buying houses that they could not afford.
And then there are the politicians, who for whatever reasons, went along with or thought up various schemes and laws to help themselves and their buddies.
And then the regulators who did not regulate.
And the rating agencies that apparently really are supposed to be rating the corporations that pay them.
And then there are the American people as citizens who want big benefits from the Congress, to be paid for with small taxes and money borrowed from strangers.
It's like a cruise ship of fools with nobody on the bridge really running things, because the crew is down in the casino, pigging out at the buffet, or watching the game on television.
Can completely agree with you on the regulators and rating agencies, slightly less wrt Congress, however, the people who were given loans by banks and via mortgage brokers don't agree at all.
It is the banks responsibility to tell us our buying power. Again, you would prefer to have a surgeon vs. a banker doing you brain surgery. You would probably not even want a banker assisting the surgeon? Would rather have a certified mechanic, no doubt, under the hood of your merc, no?
These were / are finance people who should be knowledgeable about finance, financial risk and obligation, purchasing power and etc. pushing their products on untrained and hardworking (in other jobs) people. People who would have malpractice lawsuit up the wah-zoo if they screw it up. Why should we expect no less from the people whose job it is to tell us our purchasing power? For example, it is not a mortgage situation, but our trusty bank (with a relationship over 15 years old) pressured you in (have heard of this happening with at least three friends and on at least 3 occasions for my hubby and me) pushing all types of 'vehicles' to invest our money in and etc.. But, not in the world of finance, no irresponsibility there..
Paulson and Geither were "tight" in Goldman . . . AND competitors with Lehman ?
Goldman was " TOO BIG TO FAIL? "
Lehman was " ALLOWED " To Fail ?
Coincidence ?
Isaac, you're wrong. We had a financial collapse. Only a handful of rich bankers were saved by the bailout. The rest of us are still just struggling to survive.
Any idiot can connect the dots / add two and two in this situation.
We can blame the Fed and Wall Street for the vast, vast majority of the problems our country is having now. Absolutely.
And whip, it is true that many people bought things that they could not really afford during the run-up to this crisis. But who were the idiots lending them the money? Wall Street and the Fed.
so smokers are blameless, the cigarette manufactures are all to blame?
Your 'Any idiot can connect the dots / add two and two in this situation.' is just plain wrong. Nothing is as easy and clear cut as that. The news grossly simplifies things, the real situation is much more complicated. But making gross simplifications and blaming others gets more ratings.
I'm not saying bankers didn't benefit, they did. But what the goverment did was far from being wrong. And the blame for the crisis is far from being just the bankers alone. EVERYONE had a part to play. Even you average guy who overspends and doesnt save, or the one who blindly invest savings in stock. Some people got screwed over, but the whole issue isnt a clear cut 'banks took our money, lets burn them' deal
In all of this blather over your crisis I have never heard mention of Bush in any of this. Why. If the President had been a democrat in 2007-08 we would not have heard the end of it. I love the way republicans are blaming this on Obama now. Idiots.
I understand what you're saying and it makes sense.
I think something that is overlooked is the fact that folks like the Chinese and Saudi's wanted to know that our government was backing up their investments, (in companies like Goldman, Merrill, etc.). From what I understand when Lehman went under some holders of very large accounts were attempting to get out of our system altogether. Kind of a "run on the bank" on a massive scale. It is reasonable that Paulson and company had to do something about that, at all costs. It's not too hard to imagine a catastrophic result for this country.
I don't know whether things are really being fixed or judgement day has just been postponed but it's clear that the folks in charge up until the crisis weren't doing their job. Specifically, big business republicans and all those politicians from both parties that colluded with wall street have been a disaster for the country.
The way wall street is set up with little or no regulation is akin to a giant pyramid scheme.
It's funny, the "american dream" is more about greed than anything else.
Did the bankers benefit? Yes. But their benefit is our benefit. Do they deserve their benefit? no. But we cant help ourselves if we dont help them. Thats just how it is. The failure of the banking system would be catastrophe.
People presume the billions should be spent on THEM instead of the BANKS. In reality, its being spent one both. Bank systems failing would have damaged everyday americans just as much as the banks themselves. Unfortunately people dont get it.
If the goverment divide up the money and mail it to every citizen, or use it for public projects and didnt bail out the banks, the end result would have been worse for everyone. No one would have benefited.
Common sense is a misnomer. Glenn Beck talks about common sense governing, but thats just stupid. finance and economic theory/practice goes against common sense a lot of the time, thats why there are all kinds of acadamic research about it. Thats why u need years of training. Common sense says we should let the banks fail and save the avg joes, but thoery/practice is clear thats not an option. U cant save the avg joes if the banks crash.
Commentators/reporters/politicians etc realize this, but exploit this lack of understanding for their own gain. Ignorance reigns.
Isaac - you are so right. You can't be an American. I have come to the conclusion that most americans are nuts. They drag the world down and then blame who? Pres. Obama - are they crazy? Yes.
How do we know that Paulson wasn't planning this reaction to the meltdown with Geithner and his other buddies from the banking industry? Why so many calls to Obama? Obama hadn't set up his Economic team yet, had he?
I don't like it. It's fishy.
Edit: average American just don't
Funny, Nomi tries to write this article as if the 0bama team was more concerned about the economy by the amount of calls when we all know that they were only concerned about getting elected and was backroom dealing with Paulson to helm make sure the economy kept tanking.
We know how Goldman works, don't we? Everything a Goldmanguy or Goldman gal does, he/she benefits, the firm benefits, and the client (or this case the US Gvt./Mr. Ms. Taxpayer?) Well, two out of three ain't bad! George Patton
"Such a parcel of rogues in a nation!" Robert Burns.
This is surprising only in the fact that it shouldn't be surprising. Paulson was reading the tea leaves and Obama was making sure that he had the skinny on the economic goings on in order to gain a political advantage which explains his very cool demeanor in the whole process- he knew what was coming because Paulson told him. Paulson may have told McCain the same things but it was processed differently by his team.
The truth is for anyone that wants to research this is that as far back as April of 2006 you could see this coming starting in the subprime market. One should check out National City's "sale" of its subprime First Franklin unit to Merrill Lynch. One could check out Goldman Sachs buying up large amounts of MBS at about the same time and then shorting them later that Fall. But Paulson would not because his buddies were benefiting and by extension he was as well. All of these guys KNEW what was coming as early as 2006. Check out ml-implode.com and its archives they knew and its proven they knew.
I take issue with another blogger's assertion that these are common criminals. These were very UNcommon criminals. Paulson, Dimon and Wells Fargo devised a plan to get rid of Goldman and Chase's competitors and as a bonus, destroy millions of people's lives.
But, lost in all of this, is the culpability of the FED and just common people. The FED kept lowering rates encouraging ARM's. Regular Joes were buying houses with no money down in effect running their own mini hedgefunds believing that property values ALWAYS go up. Paulson, Goldman and Dimon took advantage of this way before the crash last year. The crash was predictable. Funny, as much as I think Glenn Beck is a clown, I can remember listening to him and seeing his show on CNN back in late 2006 and he called the whole thing as did Krugman whom I am no fan of either.
A magazine called "Countryside" (for farmers) published an issue in 1999 titled "The Second Great Depression," and it described all the things that have now emerged as causes for this crisis. I've been reading about this in various places for years. The signs have actually been readable for a long time.
I don't get the obsession with these phone calls. These parties were all in the middle of a crisis, of course they were talking constantly. Bush was for all intensive purposes out at point.
First really intellignet post. They're phone calls! No transcripts, no call lengths, just the number of calls! I am just as furious about the crisis/situation as anyone else, but this is some really weak stuff. I expect more, even from TDB.
Agreed. Plus where is the list of meetings held in person? It is highly unlikely that Bush or his people were not in constant or ate least regular meetings with Paulson.
I agree that the number of calls doesn't establish much, not knowing what the calls concerned or their length, but the phrase is "for all intents and purposes."
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I think the results speak for themselves. It's not been pretty but the economy is recovering nicely. Paulson was right to leave those who causes the crisis out of the solution.
What results or recovery are you talking about and who is recovering? Last time I checked we had double-digit jobless rates.
Recovering nicely? It's a jobless recovery, jackass. 401ks have become 201ks, real estate won't recover for years. The dollar is tanking, and the stock market's poised to lose a lot of ground. George Patton
Washington Mutual was unlawfully seized and gifted by a colluding Sheila Bair of the FDIC to JP Morgan Chase and its corrupt CEO Jamie Dimon in order to keep them afloat ...
Paulson threatened the then CEO of WaMu to sell
his company to Jamie Dimon of JP Morgan Chase! ...
Please read the following Websites for the whole story ...
WAMUQ: Shareholder Information ...
http://www.wamu-shareholders-resources.com
http://www.wamurape.org
http://www.wamustory.com
http://www.wamuqd.com
P.S. ...
Just this past week even The Street had this to say ...
WAMUQ: JPMorgan's WaMu Deal: Collateral Damage.
http://www.thestreet.com/story/10603450/1/jpmorgans-wamu-deal-collateral -damage.html
wamurape.org....that certainly sounds like a fair and balanced site
Washington Mutual was unlawfully seized and gifted by a colluding Sheila Bair of the FDIC to JP Morgan Chase and its corrupt CEO Jamie Dimon in order to keep them afloat ...
Paulson threatened the then CEO of WaMu to sell
his company to Jamie Dimon of JP Morgan Chase! ...
Please read the following Websites for the whole story ...
WAMUQ: Shareholder Information ...
http://www.wamu-shareholders-resources.com
http://www.wamurape.org
http://www.wamustory.com
http://www.wamuqd.com
P.S. ...
Just this past week even The Street had this to say ...
WAMUQ: JPMorgan's WaMu Deal: Collateral Damage.
http://www.thestreet.com/story/10603450/1/jpmorgans-wamu-deal-collateral -damage.html
Rehashing who did what to whom will be an on-going debate. The bottom line (1 year after) is that banks are posting profits (by keeping losses hidden) and the # of jobless Americans is not shrinking.
My guess is that the GWB admin. was hoping that this problem could have been delayed until after he left office and then the spin would have been entirely different. Be that as it may, what has improved, where are the regulations that would help to protect the generic public against this type of systemic failure from re-occurring? The amount of dollars ($225M in 09) being spent to prevent oversight and stricter regulations by Wall Street/Banking to prevent regulatory reform is mind boggling. So, follow the money...and contact your legislator is you think they are not meeting the needs of the "man on the street".
Sorry to interupt the fingerpointing and whackadoodle: who is responsible games.
Thank you.
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