Ward on Words

Just what students of public policy need... lessons from Henry Paulson. He's  apparently joining  the University of Chicago's Harris School of Public Policy Studies for a five-year stint as a senior distinguished fellow. Curious as to the lessons he'll pass on to his students - the need for extreme leverage ratios (as he preached when CEO of GS) or the urgent need to bailout those institutions whose leverage ratios gutted their businesses (as he preached when US Treasury Secretary).

In recent months, there has emerged a terrible mythology around Henry Paulson's audacious plan to save our financial sector. The whispers have grown into kind of a roar: TARP will turn a profit for the government. To understand this mythology, we need to go back to those dark days of the fall of 2008, when our economy went into a free-fall of its own weight and it looked like nothing would save us from a Depression as terrible as the one that we call the Great Depression. Henry Paulson, then Bush's Treasury Secretary, cobbled together his rescue plan we all know as the Troubled Asset Relief Program, or TARP. In September 2008, Paulson did his best to explain his new plan . Here's some of what he said back then: As we all know, lax lending practices earlier this decade led to irresponsible lending and irresponsible borrowing. This simply put too many families into mortgages they could not afford. We are seeing the impact on homeowners and neighborhoods, with 5 million...

The most provocative line in last week's Newsweek is not the inflammatory headline that graced the cover, " the case for killing granny ." No, the most provocative line in the magazine comes on page 47 of the print edition, early in a story about Jamie Dimon , our post-millennial American hero, the man who somehow had the strength, courage and conviction to "eschew the siren call of investing in risky mortgage securities." (That's what passes for heroic these days in America - god bless us everyone...) The line I found most astonishing was this: "The only remaining question was whether it would be Morgan Stanley or Goldman Sachs to fail next." How's that for a bit of revisionist history?! Goldman Sachs on the verge of failure - at least according to those liberals over at Newsweek. That's trash talking there - language far more inflammatory than that bit about killing granny. Because Goldman, as we know, is the gold standard ...

 In Cool Hand Luke , Paul Newman, in the title role, is serving a jail sentence for chopping the heads off of parking meters (foreshadowing the rage felt today in Chicago for the parking meter mess .) Luke is a rebel, fond of questioning authority and, as seen in the scene posted above, the authorities don't want to be questioned; they want to be blindly obeyed. "What we have here is a failure to communicate," says the chain gang captain, after beating Luke to the ground. The American consumer is feeling a little beaten up these days, what with the crushing collapse of their portfolios and job prospects. There are grumblings 'round the fact that Goldman Sachs, JPMorgan Chase, BoA and Citigroup are having such fabulous success at a time when the rest of the nation remains paralyzed by the crash of the economy. We're puzzled, those of us outside of the Wall Street / Washington, D.C. corridor, by the extreme diversity in luck. All those "too-big-to-...

Full confession: I'm not a Fox News fan. When I watch the channel, I end up like Krugman's proverbial boiled frog . I watch and watch, then find myself boiling over in rage, hurling curses at the screen, particularly when Hannity is running at the mouth. Since becoming a mother, I've tried to limit the "swears" (as my son calls them) and thus limit my time with Fox News. But I saw this clip and realized that Glen Beck and I are kindred spirits, at least when it comes to our thoughts on Goldman Sachs. Beck uses a low-tech blackboard and some signs to show the flow of money from the feds to the now profitable Goldman. Quite an interesting analysis! Check it out... This is actually one time I want the Fox News guys agitating the masses over an issue. Keep it up, Glen...

The Washington Post is reporting that Goldman Sachs has had a highly profitable quarter: "...Goldman said its profits were $1.8 billion, or $3.39 a share, compared to $1.5 billion, or $3.23 a share in the same period a year earlier. That was more than double the $1.6o a share, analysts had been expecting on average." The company is now promising to return the TARP funds they were given when Hank Paulson, one of their own, was the Treasury Secretary. Some experts, however, are not happy to hear that profitable financial institutions want to pay back the money. Seems it will expand that separation between healthy and diseased banks we've been so worried about. Diseased banks will remain diseased - and like lepers of old, they will be shunned and isolated, causing them to eventually collapse. So the theory goes. I wonder just how long these experts think the US government should keep diseased firms on life support. I think Goldman should pay back the TARP lo...

As part of Paulson's Troubled Asset Relief Plan, JP Morgan Chase received $25 billion from the feds last October, making it one of the largest recipients of TARP funds. In his October 10, 2008 press release defining the plan, Paulson assured the public that "this is an investment, not an expenditure, and there is no reason to expect this program will cost taxpayers anything." Paulson, of course, was referring to the investment costs of TARP - and apparently felt that his plan would be a good deal for consumers. As he said in his press release: "We expect all participating banks to continue to strengthen their efforts to help struggling homeowners who can afford their homes avoid foreclosure. Foreclosures not only hurt the families who lose their homes, they hurt neighborhoods, communities and our economy as a whole." Back in those days, the housing crisis was the great issue confronting the Treasury Secretary - all those many loans handed over to consum...

The first hint of confusion came for me when reading about the banking CEOs who recently appeared before congress. As live-blogged by the Wall Street Journal , several of the executives claimed no need for TARP funds; that they in fact had rather unwillingly taken billions of dollars from the feds at the request of the Treasury Department. The executives made statements like, "...we did not seek TARP funds..." and "we were strongly encouraged to participate [in TARP] and we did." And now Northern Trust. This is the Chicago-based bank now made famous to most Americans through a story brought to us by TMz.com - the online gossip rag. As most of us know by now, thanks to the impeccable reporting of TMZ, the bank, which had received $1.6 billion in TARP funds, threw a lavish party recently as part of its commitment to host the Northern Trust Open charity event. In an " open letter to Northern Trust Shareholders, clients and staff " issued to defend...

According to a story in today's Wall Street Journal , the Congressional Oversight Panel (COP) will issue a report today critical of the Troubled Relief Asset Plan's actions to date. TARP was designed by the Treasury Department to "protect and recapitalize our financial system as we work through the stresses in our credit markets." Today's report, says the Wall Street Journal, calls the bailout effort "mismanaged." Mismanaged or not, TARP makes me realize that I want to recharter myself as a bank. For it's as a bank that you become a recipient of the TARP's outstanding generosity. If you look at the organizations that have been granted money from TARP, you see familiar names like Etrade, Goldman Sachs, Capital One, Bank of New York, Northern Trust, Wells Fargo - you can find the list here . I encourage you to check it out. The list of companies is a list of the money guys - the investment companies that paid out huge salaries to people ...

TARP:  A Word with Multiple Meanings In layman's terms, a tarp is a piece of material used to cover and protect exposed objects or areas. Here you see how my family employs a tarp to protect us from the elements during a camping trip. In the current language of American economics, TARP is the acronym for the federal government's Troubled Asset Relief Program, led by the brilliant investment banker, Henry Paulson, who now serves as the nation's Treasury Secretary.  TARP is the Fed's attempt to protect the nation from the collapse of our economy. TARP is also a shifting landscape – in a statement today, Paulson announced changes in how he wants to invest those billions of TARP-assigned tax dollars.  He's decided that purchasing illiquid mortgage-related assets is no longer "the most effective way to use TARP funds."  He's now looking at shoring up the consumer credit market (because consumers need more debt in their lives) and "exploring ...