Paulson's former firm to be among largest beneficiaries of bailout: John Byrne
Published: Tuesday September 23, 2008


It certainly pays to be Treasury Secretary if your former firm is a brokerage house, a new study says.

Goldman Sachs Group -- formerly run by Treasury Secretary Henry Paulson, and Morgan Stanley, stand to be among the biggest beneficiaries of a $700 billion US bailout.

"Its benefits, in its current form, will be largely limited to investment banks and other banks that have aggressively written down the value of their holdings and have already recognized the attendant capital impairment," Jeffrey Rosenberg, Bank of America's head of credit strategy research, wrote in a report obtained by Bloomberg News yesterday.

Paulson was the head of Goldman Sach's investment banking division from 1990 to 1994. He later became chairman and chief executive officer of Goldman, and left his post to join the Bush Administration.

According to the study, the bailout benefits Paulson's former firm more because banks haven't had to write down as many troubled mortage assets under accounting rules. This means that participating in the program would cause them to actually lose capital, as opposed to investment banks, which stand to gain.

Paulson $700 billion program is designed to remove "bad assets" from the US financial markets to prevent credit for businesses from drying up, which would send the economy into a further tailspin. Many businesses rely on credit to fund their daily operations.

Lawmakers are debating the plan today.

"While Goldman and Morgan Stanley, both based in New York, were yesterday granted permission to transform themselves into bank holding companies, the companies so far have operated mostly under investment-bank accounting rules, logging almost $21 billion of asset writedowns and credit losses," Bloomberg News notes.

Goldman made sizable profits in 2007 from the subprime mortgage sector. It, along with Morgan Stanley, has fared better than investment houses Merrill Lynch, Lehman Brothers and Bear Stearns, because it has held a more conservative capital base.

Paulson has admirers: during his Goldman tenure the firm donated 680,000 acres of land in Chile, and he has personally given away $100 million of his fortune to charitable groups.

According to estimates conducted by Open Secrets, Paulson is the richest cabinet member of the Bush Administration.

Geesh man, all these news articles. I get the newspaper. Don't you have anything of your own to say

I think he found a soulmate!

Here, let explain in easy to understand terminology...

I post articles and editorials, to open the discussion, then those who have 2 cents to add do so, usually freely and even with encouragement.
Generally, my fault, I mean, more often than not those who have something to add tend to stay on topic.

It seems that these discussions go in many directions, based on what is said, sourced and responded to.

I note, however, that I don't see alot of people complaining.

Warmachine, you keep right on posting.

I wish we could go have a beer some day.

The warmachine is a machine.

"Welcome, my son.
Welcome to the machine."

it might not be all that impossible!

I'll not let those who don't want to use their brains chase me off, it's just not my problem.

I find it interesting it's always the same folks. I don't get their motivation for singling me out, but whatever.

Beer? Beer, Now Cheaper than Gas!