Busted: Bankers and The Global Economy

August 5, 2008

Economic Confidence and the Art of Maybe

Captain Henry Paulson

Captain Henry Paulson

In a measure of “prudent preparedness”, U.S. Treasury Secretary Henry Paulson has retained Wall Street’s Morgan Stanley to advise the government on shoring up the props for ailing government mortgage twins Fannie Mae and Freddie Mac.

Paulson, emboldened with new authority, has hired Morgan Stanley to assist the Treasury in the event it needs to expand the government’s line of credit or buy stock in the companies or at least that is what the public line is. The reality is that where money and credit are concerned, Paulsen has the Federal Reserve attached to his right hip. It isn’t about the need for more money as such.

Morgan Stanley knows how investment bankers think, how banking instruments work behind the scenes along with associated tricks of the trade from an insider perspective. He’s an old hand himself, a Goldman Sachs man, just a little out of perfect practice. He needs a sounding board. In essence, the government has an old con man hiring the equivalent of group of con men to help beat what con men have designed for their own ends. That’s the story. The action by Paulson is beautiful in its simplicity. It’s a deal that gives Morgan Stanley plenty of reputation collateral since the money the firm is making is largely symbolic. Desperate times require desperate measures.

Where would America be without confidence?

Where would America be without confidence?

Paulson has 18 months to cover his bases in legislation that George Bush recently signed. Even so, supporters and critics of the plan are worried that taxpayers will be stuck holding the ball for the massive debt with the danger of bankrupting the country in a truly profound sense.

Paulson says that his action is all about confidence. He believes that having special powers in place may boost confidence in the mortgage twins enough to keep the U.S. Treasury from bailing them out.

That is what the whole study is about: the Art of Confidence. Maybe Paulson can boost confidence since investors and citizens know that the U.S. Treasury has its firm hand in place with the assistance of a qualified investment banking insider. That is the hope. Securing that hope cost the government a mere $95,000 for expenses on the surface.

Authorities range a bailout of Fannie and Freddie between $25 and $100 million dollars depending on who is doing the talking. An extra note of confidence with Captain Paulson at the helm may just steer us clear of the icebergs. May be.

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