Hank Paulson - Hits it out of the Park

My boy Hank really delivered in an interview reported today, as we head into the scary leg of the Global Financial Crisis.

Paulson says U.S. lacked tools to tackle crisis: report

Hmm....I'd have to argue the administration had quite a few tools running the show, sir.

He said even after Congress in October approved the $700 billion troubled asset relief program, the U.S. still lacked tools such as an adequate special bankruptcy regime for non-bank financial firms.

"We're dealing with something that is really historic and we haven't had a playbook," he said.

So, I get it that $700B wouldn't buy enough tools. I'm sure they don't sell these things at Harbor Freight. But, dude...you didn't have a playbook? Aren't you...like...the coach?

"The reason it has been difficult is first of all, these excesses have been building up for many, many years. Secondly, we had a hopelessly outdated global architecture and regulatory authorities...in the U.S.," the newspaper quoted him as saying.

Ah, yes...The old "outdated regulatory authorities". I recall endless discussions about the quaint, Depression-era regulations while Congress was dismantling Glass-Steagall and enabling wholesale financial deregulation.

The article delivers the Money Quote towards the end:

"But we have been for some time in the frustrating situation of understanding much more than the public or even the Congress understood in terms of the magnitude of what we are facing."

Um...yeah. That's why by October of last year, I felt the need to post my year-end summary of Paulson On-Message.

Heckuva job, Hank. Enjoy your millions.

Paulson: Economy should dodge recession

In my ongoing efforts to document our Treasury Secretary and his "Clap Louder" message, here's our newest installment. (I'm quoting this more than I probably should because this only shows up on y!, and they are notorious for expiring stories.)

Our boy, Hank "Subprime is Contained" Paulson tells us today, and I quote the headline, that: " Paulson says economy should dodge recession"

Admittedly, the headline is not substantiated by the text of the article, but I'm quoting this for posterity.

WASHINGTON (Reuters) - The United States is experiencing a "significant" housing market downturn but the economy is fundamentally sound and should avoid recession, Treasury Secretary Henry Paulson will tell Congress on Thursday.
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"The U.S. economy is fundamentally strong, diverse and resilient, yet after years of unsustainable home price appreciation, our economy is undergoing a significant and necessary housing correction," Paulson said in remarks prepared for delivery at a congressional hearing, obtained by Reuters on Wednesday.

"The housing correction, high energy prices, and capital market turmoil are weighing on current economic growth," he said. "I believe that our economy will continue to grow, although its pace in coming quarters will be slower than what we have seen in recent years."

A New Hope - Help Us, Hank!

Tanta over at Calculated Risk has analyzed the "Hope Now" Plan and has put her eminent expertise to fine use. Her initial thoughts after reviewing the details, which should surprise exactly no one, are that the objective here is primarily to salvage as many mortgage-backed securities as possible.

She observes that the rather specific partitioning of troubled borrowers is the key to understanding what's going on. The people who are already screwed...well, they remain screwed. The people who can qualify for a refinance...let 'em eat refi.

It's the people who are currently paid in full but are likely to begin defaulting when their rates reset that get the help. Why this group? Because, if we allow them to keep paying at a current or modified rate, it keeps the cash flow moving into the mortgage backed security. Thus, the MBS does not deliver the originally-expected returns that were expected, but it's better than what would occur if masses of otherwise liquid mortgagees were forced into foreclosure.

The primary action which drives this plan is a clarification of some tax and accounting rules which were previously unclear, and might have prohibited loan modifications. With this clarification, the parties owning the loans are now free to preserve their coupon payments, and hopefully stanch some of the bleeding from their portfolios.

So, in case you were wondering what may have motivated this particular action, rest securely in the knowledge that BushCo is passively working to preserve the solvency of capital markets. Holders of MBS, sleep soundly tonight, secure in the knowledge that "Hope is on the way!!"