Paulson--by his own admission--was not paying much attention to the way banks were slicing and dicing mortgages and selling them as complex securities. "I didn't understand the retail market; I just wasn't close to it," he told NEWSWEEK.
If Newsweek won't play prosecutor, I will: "Hank Paulson, you were Goldman's chief executive as mortgage securities boomed in 2004-5. Your earned an incredible severance, partly because of it. And you say you didn't understand mortgage securities? How is that remotely possible?"
I'd like to offer a bit of analysis, but all I've got is bewilderment. The reason I find the revolving door between Wall St. and Washington somewhat acceptable is that I think it's important that those who govern Wall Street understand it. But Paulson, by his own admission, didn't really. Think about this: A guy whose $46 million compensation package was made possible by leaving during Goldman's mortgage-security boom "was not paying much attention" to the mortgage-security boom! I don't know if Paulson is fibbing, or if mortgage-securities were such a specialized and esoteric money machine that basically nobody understood what was going on, but either way, this seems devastating.
Also in the department of buried leads, Paulson denies "secretly arranging" Bank of America's merger with Merrill Lynch. That also seems impossible to believe. New York Attorney General Andrew Cuomo testified in April that Paulson and Ben Bernanke did strong-arm Ken Lewis into eating Merrill's big ugly balance sheet. The article claims that B of A's chief exec Ken Lewis was interested in snagging Merrill's retail brokers. Well look, retail brokers are nice things to have, but clearly Lewis was more interested in the Feds not gutting his board in retribution!
Apparently Paulson is resuscitating his reputation like a doctor defibrillating a patient with wooden stakes, but just as culpable here is Newsweek. This was the magazine's fresh attempt to appear like something other than a bullhorn for conventional wisdom. It seems to me that one really good way to stop seeming like a mouthpiece for the half-truths of powerful people isn't more dynamic graphics -- it's to stop being a mouthpiece for the half-truths of powerful people.
We want to hear what you think about this article. Submit a letter to the editor or write to firstname.lastname@example.org.