The problem with putting the foxes in charge of the other foxes: Hank Paulson edition

I really should read McClatchy News more often than I do. Their reporting on foreign has stood head and shoulders above most other national news organizations in the US for years.

This report by Greg Gordon, with video included, How Hank Paulson's inaction helped Goldman Sachs 10/10/2010, reminds us how destructive and corrupting the phenomenon of regulatory capture can be, when the regulators have a perceived self-interest in giving the industries they regulate a pass. After serving for eight years as the CEO executive of investment bank Goldman Sachs, Paulson became Bush's Secretary of the Treasury.

During Paulson's first 15 months as the treasury secretary and chief presidential economic adviser, Goldman unloaded more than $30 billion in dicey residential mortgage securities to pension funds, foreign banks and other investors and became the only major Wall Street firm to dramatically cut its losses and exit the housing market safely. Goldman also racked up billions of dollars in profits by secretly betting on a downturn in home mortgage securities.

"No one was better positioned . . . than Mr. Paulson to understand exactly what the implications of his moving against the (housing) bubble would have been for Goldman Sachs, because he knew what the Goldman Sachs positions were," said William Black, a former senior thrift regulator who delivered the harshest criticism of the former secretary.

Paulson "knew that if he acted the way he should, that would have burst the bubble. Then Goldman Sachs would have been left with a very substantial loss, and that would have been the end of bonuses at Goldman Sachs."

The rampant misconduct, corruption and blatant violations of law by the Cheney-Bush administration should have already been thoroughly investigated by the Democratic Congress and by Obama's Justice Department. Obama's Look Forward Not Backward policy on turning a blind eye to even criminal acts by the preceding administration has been thoroughly misguided.

Tags: bush administration

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