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February 10th, 2010
06:00 AM ET

'On the Brink' by Henry Paulson

By Henry M. Paulson, Jr.
From 'On the Brink'

Chapter 1

Thursday, September 4, 2008

Do they know it’s coming, Hank?” President Bush asked me.

“Mr. President,” I said, “we’re going to move quickly and take them by surprise. The first sound they’ll hear is their heads hitting the floor.”

It was Thursday morning, September 4, 2008, and we were in the Oval Offi ce of the White House discussing the fate of Fannie Mae and Freddie Mac, the troubled housing finance giants. For the good of the country, I had proposed that we seize control of the companies, fire their bosses, and prepare to provide up to $100 billion of capital support for each. If we did not act immediately, Fannie and Freddie would, I feared, take down the financial system, and the global economy, with them.

I’m a straightforward person. I like to be direct with people. But I knew that we had to ambush Fannie and Freddie. We could give them no room to maneuver. We couldn’t very well go to Daniel Mudd at Fannie Mae or Richard Syron at Freddie Mac and say: “Here’s our idea for how to save you. Why don’t we just take you over and throw you out of your jobs, and do it in a way that protects the taxpayer to the disadvantage of your shareholders?” The news would leak, and they’d fight. They’d go to their many powerful friends on Capitol Hill or to the courts, and the resulting delays would cause panic in the markets. We’d trigger the very disaster we were trying to avoid.

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Filed under: Business
soundoff (One Response)
  1. gloria lewis

    Everyone of these people make me sick ,you can all pat yourself on the back because you all played your own selfish role in watching this economy fall .I have tried for 5 years to point out the key components that was going to cause this downfall .No one has listen and here we are and it will continue for at least another 3 years .The jobs that were lost are not coming back ,poverty ,crime ,health issues broken homes ,divorces you name all the ills of life they will all be on the rise ,including welfare fraud and more babies being bornt to poor families .
    The media and all the so call know it all cant stop this mess because they dont understand this problem .I say to everyone downsize as much as you can cut back as much as you can ,move back in with your relatives ,rent out a couple of your rooms for extra income ,turn your garage into an efficiency and rent it out .Yes by cutting back it will cost more jobs but you have to protect yourself because it will be a long time before this turns around .Thanks to the media and our rich selfish you know what we are all s-- out of luck .

    February 10, 2010 at 8:37 am |