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Paulson: Why I Changed My Mind

Everyone wants to know why Treasury Secretary Hank Paulson changed his mind on using the $700 billion government bailout/rescue money to make direct investments in businesses rather than buying troubled assets off their balance sheets, which is what he told Congress he was going to do.

Earlier today, a congressional panel grilled Neel Kashkari, Treasury's man in charge of the bailout/rescue, on that question in heated terms. And very heated terms.

Moments ago, CNBC's Erin Burnett got a chance to ask Paulson himself that question. Here's what he said:

"By the time the process with Congress was completed, it was clear we were facing a much more severe situation than we had envisioned early on. We had a limited pool of resources, and we asked how do we use that to get the maximum impact and get a powerful impact. And that's by putting capital in. This gives institutions the ability to...continue lending. [The money] goes further."

Paulson said it was not a problem with pricing the toxic assets -- trying to figure out how much to pay for them. "That was far from it," Paulson said.

"What changed?" Burnett asked.

"What changed was when we saw the commercial paper markets freeze up altogether. Good, mainstream corporations weren't able to raise money. Banks weren't willing to do business with each other," Paulson said.

Paulson said "the severity of the problem became increasingly clear to me."

He continued: "The Europeans kept saying, 'We have no problems.' Well, they didn't have a problem until they did. When you went from country to country around the world, this wasn't just about sub-prime [mortgages]. There was a global problem."

Shortly after, Paulson said he wasn't pointing fingers at any particular country.

"We in many ways humiliated ourselves as a nation," he said.

Paulson said the bailout is working so far.

"I think the system has stabilized," Paulson said. "I feel very comfortable with that."

Burnett created a wince-inducing moment when she quoted a Simon & Garfunkel lyric, telling Paulson that "a nation turns its lonely eyes to you." (From "Mrs. Robinson.")

-- Frank Ahrens

The Ticker is Twittering!

By Frank Ahrens  |  November 14, 2008; 2:45 PM ET
Categories:  The Ticker  
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Somehow, I just don't believe him. That could have something to do with them refusing to reveal exactly how the money is being distributed.

WE THE PEOPLE have a right to know how our tax dollars are being wasted!

Posted by: kevinschmidt | November 14, 2008 3:48 PM | Report abuse

Henry Paulson is an UNRIVALED LIAR!

Here is the problem. This man, who was head of Goldman Sachs profited to the personal tune of 50 million dollars, to which he also paid NO TAXES ON.

He is incapable of understanding that HE WORKS FOR THE TAXPAYERS NOW, not a bunch of wealthy hedge fund clients that he has no obligation to tell the truth to.

The conflicts of interest here are beyond criminal, and the sad thing is, he is taking brutal advantage of a system he helped create, and knows that very few people understand!!!

Posted by: misssymoto | November 14, 2008 4:12 PM | Report abuse

Gotta go with previous poster kevin on this one.

I have absolutely no faith in anybody who's in on this--certainly none of the current administration's Wall Street buddies. The foxes are in the hen house . . . if anybody thinks either Paulson or the guys he gives money to are going to "honestly" tell us what they did/are doing with the money, they're . . . extremely naive! (and that's being polite!)

Not one of the firms that has already gotten bucks should get any more until they produce itemized outflow sheets. And NO CEOs should get ANYTHING...they got theirs in past years of outrageous bonuses, stock options, etc. Bonuses and dividends should be frozen for this year, if not cancelled outright.

Hey, we citizens are being asked to tighten up and cut back--that's right and proper--but so should the people whose greed caused this mess!

Posted by: sboulaisforfun | November 14, 2008 4:13 PM | Report abuse

Let's face it, the Bush administration is handling this crisis with the same competence they have brought to everything else over the past eight years. I think we should put this bailout on hold until the grownups take over on January 20.

Posted by: ex-Washingtonian_in_NH | November 14, 2008 4:54 PM | Report abuse

There are still questions to be answered concerning the effectivenss of the bailout. Hopefully the fin. systems has stabilized. Once the so called "grownups" take over on Jan 20th, I'm sure we'll then be able to relax and sip our tea on the back porch.

Posted by: mljsforgione | November 14, 2008 5:26 PM | Report abuse

I'm confused. Who was it that humiliated us as a Nation ?

Posted by: jralger | November 14, 2008 5:33 PM | Report abuse

Vote Republican get communism.

Can US Tax Payers sue this Commie GOP and all their crony apontees to get their money back.

This Commie GOP Welfare for the Wealthy idea started with Cheney's 6 Billion dollar welfare check for Halliburton the company Cheney had ruin into chapter 11.

Then we had Rumsfeld's KBR joining Halliburton to suck on the US tax tit in Iraq.

Then a whole bunch of other commie GOP crony companies doing the same thing and they even ripped of US troops to do it.

Then Paulson and Bush come up with a Trillion Dollar Welfare for the Wealthy plan.

Now it seems to me that US tax payers should be able to sue every single member of this commie GOP to get the US Tax payers money back.

Can the US Tax payer have Cheney's cars towed away to help cover the Debt bill this commie GOP have left the US tax payer?

In fact I do not see any excuse for Cheney, Rove, Rumsfeld, Wolfowitz, Paulson and Bush's personal fortunes not being so reduced, in punative reperations, as to cause them all to have to live in a Washington social housing project.

Clearly this commie GOP owes the US Tax Payer not less than the $12 Trillion Dollars they borrow and spend, spend, spent.

Posted by: walker1 | November 14, 2008 5:34 PM | Report abuse

Liars, Liars pants on fire Congressional suckers all are we. We did not read the documents, so swindled all we are. Paulson did not respect us, what are we do?
Hold the press conferences,
Hold the press conferences,
Hold the press conferences,
build video ramparts!
Paper tigers all are we!

Posted by: peterroach | November 14, 2008 6:18 PM | Report abuse

Clearly Paulson is over his head. He completely refuses to recognize the trust of the country in his appointed position.

How thoroughly un american. The entire group has conducted themsleves as if in war against the american people and our consitution.

The government has waged war on the people but the people have not even put up a fight.


Paulson's appearance on Jim Lehrer was an embarassment. All Paulson did was self promote and self market as if anyone would believe his lies.

Although historically wall street types have gained attention in past depressions and downturns but no where in what I have read have the player been described as disgustng people.

Paulson, Kaskari and their friends have dehumanized themselves by pursuing money above all else. I never thought it possible than humans could become so consumed by money to the exclusion of everything else of value.

Posted by: JohnAdams1 | November 14, 2008 6:39 PM | Report abuse

Pualson's u-turn should have been anticipated given the un realistic idea of asset auction. However, the funds should still be used to resolve mortgage crisis. Read some more thoughts on the u-turn here:

Posted by: economy101 | November 15, 2008 11:41 AM | Report abuse

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