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The End of the World As We Know It?


Treasury Secretary finds himself between a rock and a hard place.


Dear Todd,

A long, long time ago, I was a section-mate of Hank Paulson at Harvard Business School . I've had no contact with him since and, therefore, am certainly not a current authority.

However, I don't believe that people's basic values and personalities change greatly. My salient recollections of Hank are of a poised, cerebral, highly competitive and intellectually honest person.

I have retained few contacts with HBS alum primarily because of my abhorrence of the cutthroat, competitive atmosphere cultivated at the school. Hank did not participate in the classroom personal attacks that frequently occurred in our first year courses. Instead he was, and I presume still is, a skilled problem solver and team player.

I believe it fortunate for all of us that Hank is the person leading the Bush administration's efforts at this time. I don't envy him. Until I see some evidence of venality, I'm inclined to think of him as the admirable, young man I knew a long, long time ago.

From time to time, I have seen articles about Hank including some that have discussed the conditions under which he agreed to leave Goldman (GS) and join the Bush administration.

With regard to his recruitment by Bush, I pose for your consideration the questions of:

How, without a major conflict of interest, he could have retained his Goldman shareholding while being Secretary of the Treasury?

What is an equitable outcome of a forced sale of his Goldman shares?

What has he stated as being the destiny of the wealth he earned during his tenure at Goldman?

Kind regards,
Minyan Ron,

Minyan Ron,

Thank you for taking the time to share your experiences with the Minyanville community. We strive to see both sides of every trade and your view is both balanced and thought provoking. I will share my personal views that are, as we know, sometimes right, sometimes wrong but always honest.

There's no doubt Hank is an extremely intelligent, aggressive, motivated man. One doesn't rise through the ranks at Goldman Sachs as he did without profound acumen or incredible execution skills. I think we can all agree that he's a sharp cookie.

Further, much like Ben Bernanke, Hank Paulson didn't create this mess. That dubious distinction belongs to Alan Greenspan, the maestro of the unintended consequences that manifested as a result of a grand experiment gone awry. We've spoken about this at length in Minyanville and need not digress to prove that point.

Others must also share responsibility for the cumulative imbalances that have been percolating under the seemingly calm financial service. Principal players include investment banks that repackaged and magnified risk through years of financial engineering.

Minyanville noted those imbalances in November,
offering that if Level III assets were moved back to the balance sheet, most major financial institutions would be technically insolvent. It wasn't a popular opinion at the time and in the interest of forthright communication, I didn't foresee the entire industry being eviscerated as a result.

Finally, widespread societal addiction and excessive spending habits must shoulder some of the blame. While there are surely some who lived within their means, saved money and paid off their mortgage on time-Minyans, quite hopefully-others operated with an A.D.D., consume now, pay later immediate gratification mindset.

That, in a nutshell, is why we warned that the other side of zero-percent financing would be a central theme this year. The bartender kept the tab in his back pocket because he knew where the patrons lived. Now, as homes are being foreclosed, his collection agenda has become more aggressive.

Minyanville prides itself on providing the financial news you need to know before you know you need it. More importantly, our mission is to provoke thought in a respectful manner while staying on point. The intention of this column isn't to point fingers or throw fat on the fire. As social mood strains and societal acrimony grows, we must address the shifting sentiment and social unrest.

I reread a column I wrote last August that touched on the blame game which was still in the first inning at the time. And I quote:

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No positions in stocks mentioned.

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at

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