We just highlighted
a Bloomberg story in which Joseph Stiglitz and other economists story
slammed Treasury Secretary Henry Paulson for not driving a hard enough bargain on behalf of taxpayers when investing the TARP funds.
So it's probably only fair that we post Paulson's response, from an interview Bloomberg TV just conducted with Paulson:
Well, what we were looking to do was not to replicate one off private sector deals. The market was under great stress and the private sector was extracting very, very severe terms and what we were attempting to do, which I think we did successfully was design a program that would be accepted by a large group of healthy banks with terms that replicate what you would get in normal market conditions. And the other point I will make here - this is an investment and I find it highly, highly likely that the taxpayer will get this money and get this money back with a profit because these are preferred, these are - as long as the financial system remains intact and stable, which it will, that these will come back to the taxpayer.
And our objective was not to say how tough a deal can we give to the banks because then what we would have is we would have a - not a program for healthy banks. We would have a failing bank program and it would have a much different complexion. And again, I think history will show that the financial system needed a lot of capital and if you leave it to the banks to say I really need capital, what you're going to get is you're only to get them when they're desperate. And otherwise, what they're going to do is shrink and not play the role we need them to play and pull in their horns. And we needed to get a program that would be accepted by a lot of banks and would provide very much needed capital. So that was the philosophy of the program.