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Paulson Admits He Never Really Understood How Mortgage-Backed Securities Worked

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Hank Paulson Admits He Never Really Understood How Mortgage-Backed Securities Worked

Here's more proof that the people who probably should have known how they were making all that housing bubble money never did—even those who personally made tens of millions off of it. The Business blog at The Atlantic notes a quote Hank Paulson, former Goldman Sachs CEO and Treasury Secretary, gave Newsweek: "I didn't understand the retail market; I just wasn't close to it."

Derek Thompson at The Atlantic writes,

I'd like to offer a bit of analysis, but all I've got is bewilderment. The reason I find the revolving door between Wall St. and Washington somewhat acceptable is that I think it's important that those who govern Wall Street understand it. But Paulson, by his own admission, didn't really. Think about this: A guy whose $46 million compensation package was made possible by leaving during Goldman's mortgage-security boom "was not paying much attention" to the mortgage-security boom! I don't know if Paulson is fibbing, or if mortgage-securities were such a specialized and esoteric money machine that basically nobody understood what was going on, but either way, this seems devastating.

We'll admit, before we read that Wired article we thought a quant was a Star Trek term. We still don't know how mortgage-backed securities really work. But we didn't make close to $50 million on them, either.

"Hank Paulson Admits He Doesn't Understood Mortgage Securities" (Thanks to B!)

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"Paulson's Complaint" [Newsweek]
(Photo: cogdogblog)

As long as it isn't his money, he doesn't need to understand. Right?



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I could probably accept the Treasury Secretary, SEC Chairman, or the chairman of the House Financial Services Committee not understanding very obscure financial instruments that represented a small portion of the overall market and were completely unrelated to any existing risk of a large over valued market ... When you have all three of these people with no understanding of trillions of dollars of financial instruments that are directly related to the largest housing market bubble in history their level of incompetence and neglect is criminal.



Kinda surprised more people aren't reacting to this...then again maybe folks are busy crying themselves to sleep at night...I plan to move to stage 3 pretty soon myself =P



To Each Man, Responsibility

Proof that you don't need to know what you do but who you know.



Criminal. How can he get away with crap like this? He was in a position that he needed to know. US of A? no, the US of Goldman Sachs, "With profit and security for them."



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I'm pretty sure the people actually trading the securities had little idea of how they worked either.





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It is hard to shed anything but crocodile tears over White House speechwriter Patrick Buchanan's tragic analysis of the Nixon debacle. "It's like Sisyphus," he said. "We rolled the rock all the way up the mountain...and it rolled right back down on us...."  Neither Sisyphus nor the commander of the Light Brigade nor Pat Buchanan had the time or any real inclination to question what they were doing...a martyr, to the bitter end, to a "flawed" cause and a narrow, atavistic concept of conservative politics that has done more damage to itself and the country in less than six years than its liberal enemies could have done in two or three decades. -Hunter S. Thompson

Another Bush success story.



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