Word: deal
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...strut, and it's not just because he pushes around foreign governments and big bankers in his spare time, or that he has pictures of himself handling snakes decorating his office. The key reason he thinks he'll win this encounter with Congress is that this is one deal that really must get done. Last Thursday the great American credit panic of 2008 was on the verge of halting the country's financial circulatory system. Anyone with money to lend was hoarding it and big institutions were starting a run on the money market funds that hold the hard-earned...
...reserved for stabilizing the dollar against other currencies. The other was the announcement Thursday night of the plan to lift the bad loans (and the myriad complex assets made up of them) out of the system and put them, at least temporarily, on the taxpayers' balance sheet. If the deal falls through, the panic will almost surely begin again...
Senators and Representatives feel most keenly uncomfortable about the nasty politics of the deal. In an election year dominated by a bad economy, it's not good to throw huge money at a bunch of Wall Street firms, especially when each party is worried the other is going to bluff and ultimately try to use the deal as a populist rallying cry. This is compounded by the fact that Paulson just happened to lead one of the biggest market players, Goldman Sachs, before coming to Treasury. In that role, he acknowledges, he placed a lot of the bad debt that...
...this, however, will not be enough to blow out the deal, because the consequences of a collapse in the so-called shadow banking system would be much worse. Over the last 20 years Wall Street built what amounted to a parallel finance system that was specifically designed to avoid the banking safeguards implemented after the crash of 1929, which limited how much an institution could be leveraged in exchange for stability. The shadow system grew nearly to the size of the real banking system, and its demise now threatens both. "As much as I don't want to be here...
...about the dynamic between the three of you? It's an odd and surprising grouping of people-you're very much the deal maker, Bernanke is professorial, and Geithner is something of a mix between the two, but certainly younger. How have those conference calls gone, how have you learned to deal with each other? What's the dynamic...