Monday, May 30, 2011

On the Brink

I recently read "On the Brink" an insider's account of the recent financial crisis by Henry M. Paulson Jr. who was secretary of the Treasury in the last years of the Bush administration. I found it more compelling than Robert Rubin's memoir of his time as Treasury secretary under Clinton which I didn't manage to finish. I expect this is mostly because Paulson served in more interesting times (per the purported Chinese curse) as opposed to any greater literary talent on Paulson's part. The book largely consists of a day by day account from Paulson's point of view of the events of 2008. It comes across as reasonably honest, albeit self-serving. Paulson makes it clear that he often found the Democrats in Congress easier to work with than the Republicans. And Obama is depicted more favorably than McCain. Paulson seems well meaning but in over his head. He admits that although when he took office he had vague worries about some sort of impending financial crisis (because there hadn't been one for a while) he didn't see it arising in the housing market. Throughout the crisis he seems to have been in firefighting mode, dealing with each successive problem as it arose, and hoping for the best (which as the saying goes is not a plan). His signature Troubled Assets Relief Program (TARP) proved unworkable. Fortunately things eventually stabilized. Of course while it is easy to criticize Paulson in hindsight it is unclear that anyone else would have done significantly better. Perhaps this is why Obama did little to change course. Bernanke was retained as Federal Reserve chairman and Paulson was replaced with Geithner, New York Federal Reserve Bank President, who had worked closely with Paulson and Bernanke during the crisis.

So in summary this is a reasonably entertaining insider account which is weak on the big picture.

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