Hank Paulson
A few days ago it came out that former Treasury Secretary Hank Paulson is a complete asshole. Some people knew this already, but Felix Salmon kind of nailed it permanently to the wall with this Reuters column where he describes how Paulson told his buddies all about what was going on in the credit crisis a few weeks or days before the public was informed. Just in case descriptions of his behavior aren’t clear enough, Salmon ends his column with this delicious swipe:
Paulson, says Teitelbaum, “is now a distinguished senior fellow at the University of Chicago, where he’s starting the Paulson Institute, a think tank focused on U.S.-Chinese relations”. I’d take issue with the “distinguished” bit. Unless it means “distinguished by an astonishing black hole where his ethics ought to be”.
Here’s another thing that people may want to know about Paulson, and which some people know already but should be more loudly broadcast: he dodged tens of millions of dollars in taxes by becoming the Treasure Secretary. This article from the Daily Reckoning explains the conditions:
Under the guise of not wanting to “discourage able citizens from entering public service,” Section 1043 is an alteration of the government’s conflict of interest rules. Before 1043, executive appointees (mostly high-up cabinet members and judges) had to sell positions in certain companies to combat conflict of interest – like say, a former Goldman Sachs CEO-turned Treasury Secretary with millions of GS shares. After Sec. 1043, the appointee gets a one-time rollover. Upon their appointment, he or she can transfer their shares to a blind trust, a broad market fund or into treasury bonds. They’ll have to pay taxes on the position one day, but not immediately after the sale… like the rest of us.
I’m a big believer in incentives. And from where I sit, when you piece together Hank Paulson’s incentives, you get his actions. In some sense we shouldn’t even complain that he’s such an asshole, because we invented this system to let people like him act in these asshole ways.
[It brings up another related topic, namely that the level of corruption and misaligned incentives actually drives ethical people out of finance altogether. I want to devote more time to think about this, but as partial evidence, consider how few “leaders” from the financial world have stepped up and supported Occupy Wall Street, or for that matter any real challenge to business as usual. At the same time there are plenty of people in finance who are part of the movement, but they tend to be the foot soldiers, or young, or both. Maybe I’m wrong- maybe there are plenty of senior people who just are remaining anonymous, doing their thing to undermine the status quo, and I just haven’t met them. According to this article which I linked to already for a different reason, and which corroborates my experience, there are lots of people who see the rot but not too many doing anything about it.]
Here’s what we do. We ask people who want to be public servants to sacrifice something (besides their ethics) to actually serve the public. I’m convinced that there really are people who would do this, especially if the system were set up more decently. We don’t need to offer huge cash incentives to attract people like Paulson to be Treasury Secretary.
update: I’m not the only person who thinks like this.
mathbabe 
I also found this interesting from Yahoo Answers http://answers.yahoo.com/question/index?qid=20080924102539AAW2d82. The “free market” isn’t really free anymore once there is assymetry of information. Traders take advantages of the information they have that others don’t have like this one guy portrayed by CNBC American greed “The Mad Max of Wall Street” http://www.hulu.com/watch/166191/american-greed-the-mad-max-of-wall-street
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Here’s a modest proposal: all senior political and civil service jobs should end in compulsory execution (no exceptions). I completely agree about all the incentives, by the way.
(Note: I’m not 100% sure, but my subconscious tells me I might have stolen this proposal from “Parkinson’s Law”)
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“A few days ago it came out that former Treasury Secretary Hank Paulson is a complete asshole.”
If you only learned this a few days ago, you haven’t been paying attention. If you read his autobiography, you get a good taste of this (from his own self-serving account). For instance, he makes a big deal about how he had to fire the CEOs of Fannie and Freddie because you can’t bail out a company and not punish its CEO, A short time later he bails out Citi and doesn’t fire Pandit. He ordered Lehman (a long time rival) to declare bankruptcy before they were insolvent. He would later provide funding to every other major bank on wall street. When he was CEO of Goldman he gave a large parcel of Goldman’s land holdings for conservation. That sounds admirable until you learn that his son received a huge salary from the same charity he donated to the land to. In the end, all he did was rob Goldman shareholders (pension funds, widows, orphans, etc) of value in a deal that “coincidentally” benefited an organization paying his son tons of money. The list goes on.
I actually believe that bankers get a bad rap, and that most are genuinely good people. I do not believe that Goldman Sachs is evil and I thought Paulson (who had more money than he could ever spend, thanks in part to the 9-figure bonus American taxpayers gave him to take the job) would really work hard to do what was right at Treasury. It is now absolutely clear, however, that Paulson has never had any interest in doing anything that isn’t in his own interest. Moreover he is, at his core, a despicable human being.
His own mother cried when he announced he was going to work for the Bush administration. Probably because she finally saw what a morally bankrupt snake the son she raised had become.
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Read “Fire-Breathing Liberal: How I Learned to Survive (and Thrive) in the Contact Sport of Congress” if you think that these people don’t sacrifice anything. Or talk to anybody who’s had to work with DC at any point. These people give up a lot to do what they do. I’m just trying to point out that the caricature is sometimes accurate, sometimes not.
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