Paulson's Parallel Universe → Washingtons Blog
Paulson's Parallel Universe - Washingtons Blog

Friday, October 24, 2008

Paulson's Parallel Universe

In the real world, strong banks that made good decisions should thrive and weak banks which made dumb investments and lending decision should fail.

But in the parallel universe inhabited by Sec Treasury Paulson, the wealthiest banks as well as poor banks should all get bucket loads of money so consumers won't know which are weak and which are strong, but will keep on banking with the weak banks. As CNBC writes:

"Nine of the largest U.S. banks were essentially arm-twisted last week into signing on for the first $125 billion in capital infusions in an attempt to remove the stigma that participating banks need the funds to survive."

In the real world, banks aren't lending, and they've admitted that - no matter how much the government throws at them - they won't lend in the foreseeable future.

But in Paulson's parallel universe, the banks will be cheerfully handing out loans loans left and right to every mom and pop who politely ask:

"Our purpose is to increase confidence in our banks and increase the confidence of our banks, so that they will deploy, not hoard, their capital. And we expect them to do so, as increased confidence will lead to increased lending," Paulson said on Monday.
In Paulson's reality, everything is working out just fine. But in the real world where the rest of us live, the real problems aren't being addressed, and the bailouts are only making problems worse.

1 comment:

  1. Glad to see you are sticking on the bailout. Lehman Brothers was left to fail and that is called a mistake. Why was there no follow on bankruptcy then?

    The bailout of AIG FP went to hedge funds that bound credit swaps on Lehman failing or others betting on rating declines. AIG has drained over 100 billion from the government. Which had to go to those who bet on failures and downgrades. Many of whom were hedge funds. I-banks that had offsetting swaps needed the money from the AIG bailout or they would have been caught.

    Its an insiders game and it takes just a little bit too much time for most people to think through where the AIG 100 billion bailout money went to, hedge funds and players, many of whom hire from the top ranks of DOJ, Fed, Treasury, etc.


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