27 February 2012

A Book Review: 'On the Brink,' by Hank Paulson

Received from a member in Rockhampton: 

Your reviewer must own up to the darkest suspicious about the American political system.

His faith was first shaken when Jimmy Carter became president, which is probably too long ago for young nationalists of today to remember. Would military officers, this then-young scribbler asked himself, really take orders from such an obvious twit? Never mind the voters: they have to pick one of two, and how the choice is presented to them may leave them feeling they have no choice at all. But some reasonably mature men seem to take part in the process that refines the choice down to that final two. How does a Jimmy Carter get to be one of them?

Then there was George Bush II. He wasn't exactly another Jimmy Carter, but it was still a bit hard to believe that responsible adults would let him into the room while serious decisions were being taken.

And there were even doubts about politicians that your reviewer kind of liked, such as President Ronald Reagan. Ron might say all the right things, and we didn't really care if a script-writer wrote them for him - we knew that was happening. But would a responsible military officer really give an old man like that "the button," the mechanism by which the President of the United States supposedly ordered an atomic strike on the Soviet Union? What if he had a mini-stroke and started a nuclear war because he was confused and thought the Russian missiles were already on their way?

So your reviewer doesn't know what to believe about the American system. He keeps looking for evidence that someone who knows what he is doing is really in charge. And this led him to read Henry Paulson's book.

Henry Paulson was George Bush II's second Treasury Secretary. A Treasury Secretary in the U.S.A. is like a Federal Treasurer in Anustralia, but he isn't quite as high up the pecking order. An Australian Treasurer is always the second man in the government, and he often believes he should be the first man. There is a long tradition of Australian Treasurers kicking out their Prime Ministers and taking over, or at least having a go at it. In America the Treasury Secretaryship is not usually a starring role: the stars are the President, the Secretary of State (Minister for Foreign Affairs), and the Secretary of Defence. But in the financial crisis of 2008, Henry Paulson found himself at the centre of things.

Your reviewer remembers when H.P. was appointed. George Bush's now-long-forgotten first Treasury Secretary was sacked because he couldn't remember to keep saying the things that the boys in the President's office told him to say - he couldn't stay "on message," and apparently he couldn't decide anything either.

The 'Australian Financial Review,' Australian businesses' newspaper of record, informed its readers that Henry Paulson of Goldman Sachs was taking the job, and he was taking it on the condition that he was actually going to be in charge. Nobody was going to be telling him to stay "on message." Coming from Goldman Sachs, he would expect to outrank the boys in the President's office, and probably outrank the President too.

Then the financial crisis of 2008 struck, and Henry Paulson was suddenly the man in the hot seat. The Administration's policy on financial matters was suddenly the government policy that everyone wanted to know about, and President George wasn't really up to explaining it, or knowing what it was either. Henry had to do it, and he took to the crisis like a duck to water. He convened meetings. He negotiated with some people and gave orders to others. He accompanied his boss, George, to meet other terrifically important people such as President Sarkozy of France, Chancellor Merkel (a girl) of Germany, and assorted Chinese. He talked a lot on the telephone with Ben (Bernanke) and Tim (Geithner), and had lots of conference calls and late-night and weekend work, and so had his staff (he had lots of staff). He gave Sheila (Bair) a friendly shoulder to cry on.

He thought they were all good fellows most of the time, and he said a prayer to the Christian Scientist god (don't ask me - I don't know) once in a while, and occasionally had to rush out of a meeting to hide in a corner and have some "dry heaves." Your reviewer usually gets hay fever in those sorts of situations. Dry heaves might at least be over more quickly. Wet ones would be nasty though.

The President, great man that he was, occasionally came in with wise words of the sort usually attributed to sports coaches. You know the sort of thing: "Hang in there, tiger."

Your reviewer has now decided, on the basis of this book, that if anyone is really in charge in the United States, he or they don't bother to look down as far as the Department of the Treasury. If Henry knows anything about economic history, about the many times all this has happened before, he never mentions it. Does he know about the Fuggers of Antwerp, who financed kings, and whose collapse "shook the world"? Does he know about the Knights Templar, whose banking operations came to an abrupt end when they were all tortured and executed? Does he know about the Medici, who did better than the Templars, rising to provide the world with two popes (Leo X and Clement VII) and two Queens of France (Catherine de Medici and Marie de Medici) on the strength of their family's financial skills?

Your reviewer wouldn't expect every young Australian nationalist to know about all those things. But someone who is one of the top dozen or so men in the world, in terms of financial management, and whose whole speciality and career is in financial management, should know something of what has gone before. He should know about the 1890s depression and the inflation that occurred in Europe after the Spanish discovery of gold in South America, and what the consequences were. He should know about the Mississippi Bubble and John Law's paper money fiasco in France. Your reviewer knows at least something about those things, and he would want to be very careful about repeating the mistakes that led to the worst disasters. But Henry is from Goldman Sachs and he found himself in charge of American financial policy at a time of crisis, and he apparently believes that history began with World War II, and that all he needs to know is the law and how to bend it.

While all this was going on, like a good American novelist, he apparently still managed to notice the weather: "It was an overcast day in Washington." Your reviewer wouldn't have noticed a medium-level earthquake if he had been in that position.

There was another Marie (not de Medici) who was Queen of France once - Marie Antoinette to be exact. She had undue influence on her husband and the government, and she believed that a Minister of Finance should be a nice boy, never mind whether he knew anything about finance. Eventually the French cut her head off. Henry's boss, George Bush II, should be grateful the same thing didn't happen to him.

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