On Friday, the US House approved the revised USD 700 billion bailout to stabilize the financial markets. Henry Paulson has finally gotten his way and now the question remains…will it work? Based on what the equity markets did the last couple days, there is not much confidence. The credit markets are still locked up and LIBOR rates have hit recent highs.
I personally feel Paulson is the wrong guy to be leading the clean up, since it seems he was partly to blame in the creation of this mess.
…we and other global firms have, for many years, urged the SEC to reform its net capital rule to allow for more efficient use of capital. This is the single most important factor in driving significant parts of our business offshore, so that our firms can remain competitive with our foreign competitors risk-based capital standards must become the norm. The SEC has made it clear that risk-based capital rules can be implemented only when the Commission is confident that firms employing value-at-risk models have robust credit and risk management policies in place. (full testimony)
That was Paulson’s statement back in 2000 to allow banks to take on more leverage. So in 2000 he asks for more leverage, then 8 years later it blows up and now is asking to clean it up.
That would be similar to an executive of a large alcoholic beverage maker asking to lower the drinking age, allows advertising on college campuses, sponsor parties, etc…Then realizing kids are getting drunk and doing things they shouldn’t be…Then hiring that executive to clean up it via legislation. Only in America.
So why do I call it the Harvard Plan because the 4 most powerful men right now in this economic blow-up all attended Harvard:
George Bush – MBA ‘ 75
Henry Paulson, Treasury Secretary – MBA ’70
Ben Bernanke, Chairman of the Federal Reserve – BA ’75
Christopher Cox, Chairman of the SEC – MBA ’77
A little humor, check out this website for Strategery Capital Management