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The Economic Catastrophe In Henry M. Paulson's On The Brink

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After reading “On the Brink” by Henry M. Paulson, Jr. the novel truly shows the economic catastrophe from 2007-2009 in the United States. Paulson spent three years as the United States Secretary of the Treasury 74th Secretary of the Treasury. He demonstrated awesome efforts to guarantee that America didn't encounter a financial disaster. Preceding his part in the Department of the Treasury, Paulson was the Chairman and Chief Executive Officer of Goldman Sachs along with the Secretary of the Treasury. “I’ve watched the economy flounder and the mood of our citizens darken as they struggled with unpaid debts, foreclosure jokes, ravaged nest eggs, lost jobs, and lost confidence in themselves and in our system (XIV Paulson).” In other words, paulson …show more content…

According to investopedia, a bailout is a situation in which a business, an individual or a government offers money to a failing business to prevent the consequences that arise from the business's downfall. Bailouts can take the form of loans, bonds, stocks or cash. Abandoning the laissez-faire principles he maintained for his 30 years or more at Goldman, he bailed out Fannie Mae, Freddie Mac, A.I.G. and Citigroup, among many other men. Furthermore the Treasury and the Feds did not want to have to provide failing banks with money from the government for several of reasons. Paulson states, “he notes that the American people were not happy to see big compensation packages for an industry needing government help” (283 Paulson). Some think government bailouts are bad because for proponents of a mostly capitalist economy, government mediation in the "free" markets is theoretically and often essentially bad in the long run. If the government continues to bail out companies time and time again, Most people will see it not as a way to avoid the domino effect that a bank failure would cause in the deposits, loans, investment and other markets. In fact, they just see it as the government giving money to rich people despite their mistakes so that the rich can continue to become

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If there was ever a word to describe the events that led up to the financial crisis of ’08, “Moral Hazard” would fit the bill perfectly. Moral hazard happens in financial terms when the success of a particular transaction is very heavily dependent on the performance of a particular party’s obligations, but where a particular party has no interest or incentive to carry out that obligation diligently. Let’s for instance take the example of a loan worth $720K, which was given to a strawberry picker earning around$14K/year to acquire a certain piece of property in the early 2000’s . In this case moral hazard was there and existed because the loan company intended to sell the loan forward to the credit rating agencies due to the inability of the

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The Secretary of the Treasury Hank Paulson was the man in the eye of the storm in charge of cleaning up the banks mess during the financial crisis of 2008. The beginning of the financial crisis came with the fallout of Lehman Brothers that marked one of the largest bankruptcy in American history. The Lehman Brothers bankruptcy then was proceeded with Countrywide Insurance being bailed out by Bank of America, and the enlightenment of the poor mortgage portfolios of Merrill Lynch, Morgan Stanley, and Citibank . Hank Paulson was in charge of dealing with and worked with individuals such as: Ben Bernanke the Federal Reserve Chairman and Timothy Geithner to propose a way to stabilize the American financial woes. The stabilization came from a 700 billion dollar legislation pushed by Hank Paulson.

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