Henry “Hank” Paulson is a man who needs no introduction.
The former Goldman Sachs CEO and Secretary of the Treasury under George W. Bush has written a new book, titled “On The Brink: Inside the Race to Stop the Collapse of the Global Financial System.”
Throughout the book, Paulson chronologically details his time spent in the Treasury and how he dealt with the financial crisis head on. It’s a fantastic read; not too long, succinct and to the point. Paulson takes no political bias in his novel and paints a vivid picture of just how bad the financial crisis became. It’s a book anyone, no matter how much you like finance, can enjoy.
So we hand-picked 10 interesting facts from the book that surprised me about Paulson. Perhaps you’ve heard of a few, but most are little-known tidbits that really let you see the former Treasury Secretary for who he really is.
In late 2007, as banks began having massive write downs and posting huge losses, the Chinese stepped in to save the day (and their investments). When Bear Stearns failed and needed a capital infusion, state-owned Chinese investment company Citic Securities stepped in with a $1 billion investment in which Bear would invest $1 billion in Citic and vice versa.
And thanks to Paulson, the Chinese worked with us to avoid a massive U.S. Treasury sell off.
What is a Christian Scientist? Good question. Here's what Wikipedia says:
'Christian Science is a religious belief system founded by Mary Baker Eddy in 1866 and is practiced by members of The First Church of Christ, Scientist. Christian Science asserts that Man and the universe as a whole are spiritual rather than material in nature and that truth and good are real tangible things, whereas evil and error are unreal. Christian Scientists believe that only through prayer and fully knowing and understanding God will this be demonstrated.'
The key words here are 'through prayer,' as Paulson constantly prays throughout the book. He prefers prayer over proper medical treatment and when his situation becomes dire, he dives into prayer for guidance.
Before credit default swap became a popular term in the evening news, Hank Paulson knew something was up way before the problem became systemic. He writes:
'I couldn't sleep. I was hot and agitated. I tossed and turned. I couldn't stop thinking about the consequences of a Bear failure. I worried about the soundness of balance sheets, the lack of transparency in the CDS market, and the interconnectedness among institutions that lent each other billions each day and how easily the system could unravel if they got spooked. My mind raced through dire scenarios.'
Throughout the book, Paulson frequently talks about spikes in the spreads of CDS agreements for multiple companies and truly understands the systemic danger the agreements encompass.
Paulson has plenty of trouble sleeping during the financial crisis in 'On The Brink.'
On several occasions he chronicles his difficulties falling asleep. Paulson says that on tough days he'd 'fall asleep exhausted around 9:30 PM or 10:00 PM, then would wake up several hours later and lie awake for much of the rest of the night.'
Another time, during the collapse of Lehman Brothers, Paulson goes to take a sleeping pill just to get a good night's rest for once, only to throw the pill away and instead turn to prayer, keeping true to his Christian Science beliefs.
By now, this quote is known quite well by those in the media.
When neither Barclay's of London or Bank of America wouldn't purchase Lehman Brothers in 11th hour negotiations, Paulson had to inform his staff and the rest of Wall Street's elite CEOs. Paulson walked into a 1:00 PM meeting and promptly blurted out: 'The British screwed us.' , referring to the failed sale of Lehman to Barclay's.
Early to bed, early to rise; that's essentially the unwritten motto of Hank Paulson.
In September of 2008, when the financial crisis was in full swing, Paulson describes his morning routine:
'Normally I left home by 5:45 AM, went to my gym, and ran hard on the treadmill. Then I'd do some core exercises until 7:45 AM. Fifteen minutes later I was in the office. (Those 90-second showers of my childhood sure helped me keep to this pace.)'
Constantly, throughout 'On The Brink,' Paulson talks of his disdain for Nancy Pelosi, the Speaker of the House.
One correlation between Paulson's book and media reports of Pelosi is that of her taste for lavish spending of taxpayer dollars. We've all heard about Nancy Pelosi spending $101,000 on in-flight entertainment, but Paulson tells a story that makes one become incensed with taxpayer rage:
'We were in Nancy Pelosi's conference room…she maintained an elegant, almost formal atmosphere, with fresh flowers and bowls of chocolates, that was quite removed from the rough-and-tumble of the floor.'
Wait for it.
'Once, when I walked in with a cup of Diet Coke, she'd said, 'Oh, we don't use plastic cups,' and an aide promptly handed me a very nice glass for my drink.'
Sure Hank liked recycling and reusing his old pots and pans, but for a former Goldman Sachs CEO to declare Pelosi's glasses as 'very nice' makes one think about Pelosi's addiction to spending.
Former Lehman Brothers CEO Dick Fuld is a well-educated man. Undergrad at MIT, Harvard Business School MBA. Clearly he is a bright guy.
But Paulson's conversations with Fuld ultimately reveal that Fuld got caught up in the infamous Lehman culture, where your way is either the Lehman way or no way at all. Instead of taking a reduced share price in a buyout or capitulating to some of the Treasury's terms, Fuld constantly deluded himself into believing Lehman was, and always would be, a healthy firm.
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