Tuesday, October 08, 2013
"Hank: 5 Years from the Brink": Henry Paulson describes how he handled the bailouts of 2008, and it's a warning for today's political debt ceiling crisis
“Hank: 5 Years from the Brink”, by Joe Berlinger and from Bloomberg Business Week and Radical Media, should be mandatory viewing for members of Congress right now, most of all the Tea Party Republicans willing to hijack the system and force another financial crisis to force the rest of the country to accept their “cold turkey” ideology.
The film is, of course, an autobiography of Hank Paulson, the Secretary of the Treasury during the administration of George W. Bush. He presided over the bailouts in September, 2008 after the collapse of Lehman Brothers and AIG. He had also effectively seized Fannie Mae and Freddie Mac a few weeks before. For much of the film, Paulson speaks to the camera and tells his story, as video of the events is edited on top of his own narration. But this is not mockumentary.
Paulson was born in Florida in 1946, but apparently was raised in a rural environment in the West, by a strict disciplinarian of a father. He talks about family camping trips with blueberry cobbler cooked on the range; he was quite handsome as a young man. His wife, Wendy, describes their first date in college as a disaster, when people through paper airplanes at a Boston Pops concert. His career started with another bailout situation in 1971, of Lockheed, and logically sets up his capacity to handle the who evolution of the housing bubble and the collapse, which really started in 2007.
The details of his actions during the bailout meetings are interesting. At one point that third weekend of September 2008, he called his wife, who gave him inspiration with a verse from one of the Timothy epistles. But some hours later he developed dry heaves and vomiting in one of the meetings, but had to carry on.
Paulson, listed as a Republican in Wikipedia (some of my friends describe his as a Democrat anyway) defends his heavy government intervention under a conservative Republican president as absolutely necessary to prevent a total economic collapse. Otherwise, he says, we could have started another Great Depression, with public soup lines, 25% unemployment, and generalized lawlessness and breakdown of civilization. I think this observation is particularly relevant right now as Congress and the president battle not only over the shutdown but also the debt ceiling. Some radical Republicans, who seemed to have leveraged partisan power in asymmetric fashion, talk like ordinary Americans need to take their medicine now and go cold turkey on entitlements so that borrowing stops. There are “doomsday prepper” radicals who want to see an “NBC Revolution” so that a new order based on local family and neighborhood power develops, even if the society of old is gone. After watching this film, I would wonder how the financial world we know could survive a formal US default (although there are those who say that not paying entitlements does not constitute default).
The narrative about the passage of TARP (Troubled Assets Relief Program) seems prescient of today’s partisan battles over Obamacare and the debt ceiling. None of the banks at that October 2008 Monday meeting wanted to be the “littlest midget” in the room, most of all Wells Fargo. Another interesting observation is that the money market mutual funds, common in many retiree’s portfolios, were themselves illiquid, inhibiting the ability of savers to get money out, but also contributing to the freezing of credit markets.
Some of my own friends socially adamantly opposed the bailouts in 2008, with some people saying it really was time for people to live within their means, even if it meant living in the streets like poor people for a while,
Bloomberg’s site for the film is here. I urge anyone involved in today's political crisis to watch this film. It is sobering, and it is riveting.
I watched the film on Netflix instant play. It is also available free on YouTube (I’m not sure it’s legal).
An alternative name is "Hank: Five Years from the Brink".