Chris Hedges | Our BROKEN State

A Multipolar Reserve Currrency: US Dollar Alternatives

if you’re looking ahead of the elections
do you think that the outcome of the
elections either way
would influence foreign policy going
forward and as a result
foreign countries decisions to hold more
or less gold
absolutely i mean we’re working on a
report right now
on the implications of the election for
for gold and precious metals
uh and you have like four different
scenarios on how things
shake out but definitely i mean you know
administration has um
excelled in its ability to reduce the us
stature around the world
and to create hostile relationships with
countries around the world
it’s had a negative effect on cpm group
there are people who don’t want to deal
with u.s companies
and and so i think a change in the
while it wouldn’t be a 180 degrees turn
there are people in the democratic party
including joe biden
who will probably retake retain would
some sort of hostile posture toward
it may be less hostile than the current
one and it may be less hostile toward
and and other countries around the world
so you should see
if you saw a change in the
administration and a change in the
you should see some improvement in the
u.s relations with
the rest of the world but there’s been a
tremendous amount of damage
done to the u.s stature globally
and it’s probably not going to get
changed by one
by a change of government for four years
do you think the us dollar then going
forward could lose its status as a de
facto reserve currency of the world
because you see another currency
challenging that status
as i said the part of the problem is
that the u.s owes the world so much
it owns it we have 62 percent of
monetary reserves
the u.s dollar will lose its stature
as the reserve currency in the future
the future may be 50 years from now and
it is it not it is reversible
this could not happen if the u.s
government got its act together but i
no hopes for that well if the u.s if the
u.s loses that status
who’s what’s going to take over who or
what well i was getting to that
as i said earlier most central banks in
the world
see as an ideal a multi-polar
international currency regime they
understand that it will take
decades to get there because of the
imbalance and liquidity between the
dollar and
all of the other currencies in the world
62 percent of their money of their forex
is in dollars that means that there’s
only 38 percent and everything else
they have to slowly make that transition
no government wants to see
its currency replace the dollar as the
reserve currency
what they’d like to see is a multi-polar
international currency regime
where people are free and companies and
governments are free
and there’s sufficient liquidity in
non-dollar currencies
that you can own and hold a portion of
your wealth
in those other currencies a greater
proportion of it
no one like if you talk to the chinese
central bankers if you talk to
other central bankers in around the
no one expects the dollar to disappear
as a
quote de facto reserve currency
but they‘d like to see it disappear as
the de facto current
reserve currency but they’re fully aware
that this is something that’s going to
take decades to execute
if it can be done okay you brought up
china i’m surprised to see that china
was relatively low on the list
when you’re talking about their
percentage of foreign reserves
in gold holdings it’s only four percent
of the foreign reserves in gold
are you surprised at how low that number
no um i’m not surprised i
i should ask you why you’re surprised
that it’s high
but you know china that should the
people’s bank of china for
decades had a view that gold was a small
and insignificant portion of its
monetary reserves
it changed that view in 2015 at a time
when it rolled out
a massive acceleration of
its efforts to make the rmb
more of an international currency it’s
still not you know fully convertible
but they expanded the daily trading
ranges and they expanded the longer term
trading ranges that they found
acceptable on the rmb
they started encouraging rmb
bonds offshore being issued offshore
and they said okay we’re adding some
gold to our reserves and we’re going to
continue to buy gold because
we see gold as a small but significant
part of our monetary reserve policy
going forward
now this was in 2015 and it’s very
important to understand that that was
after 2008 and 2009 when the u.s
basically stuffed everybody else and
the bankers or the executives at the
banks uh
in the us and and so this was a direct
to the inappropriate behavior that the
treasury had during the financial the
global financial crisis
uh and and the chinese central bank
basically said we have to accelerate our
to help move toward that multi-polar
regime that we all would like to see in
the long run
uh and so they started adding their goal
if you go back to 2015
they probably had about 1.1 1.3 percent
of their reserves in gold so the fact
that it’s up to four percent
and the fact that they have like three
trillion dollars of dollar reserve
of of foreign exchange reserves means
that it’s going to be a slow transition
as they add gold to it and as i said
they’re very price sensitive
they pulled out of buying gold for about
15 months a few years ago
then they came back and they were buying
but then they pulled back at the end of
and they haven’t reappeared they said
you know in the past they said
we’ll buy gold below a thousand when
gold went over a thousand they
didn’t buy any gold for several years
then they increased their threshold
and they knew they were buying uh and
then when the price started rising this
year they said no
you know we’re going to wait finally
jeff with everything that’s happened
this year and in particular with the um
central bank activity or slowdown of
central bank buying activity
do you think the run-up of gold prices
to two thousand dollars
all-time highs has made sense to you do
you think valuations are
correct as they should be right now yeah
i think they are
uh you know obviously the trend of the
next year or two is going to depend on
several things the outcome of the us
elections for the senate as well as the
brexit is coming up the pandemic which
is getting worse in europe now and is
expected to get much worse in the united
there are a lot of negative factors
there uh that fully support the idea of
a two thousand dollar
gold price now i wouldn’t be surprised
to see the price of gold
spike up higher on a short-term basis uh
then maybe plateau depending on what
happens politically
uh but we expect higher prices later
2023 2025 because
none of these things are being solved
would you have a long-term price target
in mind
we’re looking at a gold price that is
very significantly higher than it is
all right perfect jeff jeff i want to
thank you so much for uh speaking with
me today that was a fascinating talk
thank you for your time thank you for
your time
and thank you for watching kiko news
we’ll have much more coverage for you
at the denver gold form stay tuned

Steve Eisman | Wall Street Debate | Opposition (4/8)

The Motion: This House Regrets Blaming Wall Street For The Global Financial Crisis.

Steve Eisman continues the case for the opposition, as the fourth speaker of eight in the debate.

Motion Defeated.


[Music] you know to Steve Eisman to continue the case the opposition it’s been my experience that most people even extremely educated people don’t fully understand what the financial why the financial crisis happened so rather than throw Thunderbolts let me spend most of my time trying to explain what happened because I think in the explanation the answer to the question will be fairly clear the financial crisis is due really to four major interlocking factors too much leverage a large asset class known as subprime mortgages that blew up systemically important banks owning the asset class and derivatives tying balance sheets all over the world let me start with the leverage between 1997 and 2007 leveraging the large banks in both Europe and the United States tripled that’s only the stated leverage if you add on top of it the shadow banking system and all the off balance sheets stuff that was really on balance sheet the amount of leverage went up four to five times it’s a lot of leverage now there are a lot of reasons for why this happened I could probably spend the next two hours discussing why let me discuss just one aspect of it that most people don’t have never really read about and that is psychological there is an entire generation of Wall Street executives my age and up who had a very strange experience in the 1990s in the early aughts they made more money every single year now the reason why they made more money every single year was that their firms made more money every single year but their firms made more money every single year because the leverage of their firms was going up every single year and really what was happening was they mistook leverage for genius and the problem that will emerge was that if you had gone to any of the executives of these firms and I did and said to them listen the entire paradigm of your career is wrong the response would have been listen kid I made fifty million dollars last year what did you make it’s very hard to tell someone who thinks he’s God that he’s wrong subprime mortgages you know people today not even remember really what a subprime mortgage was all about it was a mortgage that had a two or three year teaser rate and then was Reese price up for it for the next 27 or 28 years and most mortgages originated between 2002 and August of 2007 had a teaser rate of 3% and a go to rate of 9% 3 % 9% the industry and Wall Street under wrote the loans to the teaser rate which is a fancy term that means that the underwriters knew that the consumer could only afford to pay the 3% for the two to three years he or she could not afford to pay the 9% now why would anyone write a loan a 30-year loan where the customer can only afford to pay the teaser rate for the first two to three years and here’s the second great lesson of the financial crisis incentives Trump ethics almost every time the reason why this happened was that the consumer would take out a loan and would pay three to four points upfront for the privilege of getting the loan and because he or she could not afford to go to rates after two to three years the consumer had to refinance and would pay three to four points for the privilege of doing so which meant that the consumer could not afford the loan and would have to refinance and would never be able to pay off his or her principal from a societal perspective this was a disaster but from an economic perspective for the people who were writing the loans the subprime mortgage companies and for the Wall Street securitization departments that were buying them packaging him and securitizing him and selling him all over planet Earth it was a boondoggle because it meant they got to make they got to redo the loans and re-securitizing every two to three to four years and make their bonuses over and over again as the underwriting deteriorated and the credits began to get worse as was became very obvious in 2006 no one neither the underwriters or Wall Street said there’s something wrong here our underwriting is bad let’s do less securitize less and tighten our standards and the reason for that is no one has ever begun a sentence in the English language where they say I think this year I’ll make less money because it would have meant they would make less money and they didn’t want to make less money they wanted to make more money so they let the underwriting standards deteriorate with full knowledge that they were deteriorating and that’s the story of subprime third systemically important firms owned the asset class this is a bit of an irony the model of Wall Street is to buy it and sell it not buy it and hold it and here Wall Street bought it sold some of it and kept some of it something they never ever did why well over the years between 2002 and 2007 it did become more difficult to find investors to buy all of the product because so much was being generated now if we lived in a rational ethical world and we don’t but if we did then what would have happened is Wall Street and the underwriters would have tightened standards and underwritten less because there was if there was not enough end-users but instead they convinced their firms to hold the paper and invest in it with the rationale of how bad can it be it’s rated triple-a and now derivatives this is one of the more important parts of the story if I own debt and GE and I want to mitigate my risk I can buy a credit default swap from goldman sachs pay a certain fee for that and if GE goes bankrupt goldman sachs pays me so I have now mitigated my risk by owning a credit default swap credit default swaps reduce risk for individual transactions but the problem is that the only works in this example when GE goes bankrupt if Goldman Sachs is not is not not bankrupt and essentially what has happened is my balance sheet has been tied to Goldman Sachs is balance sheet multiply that transaction by trillions and you can see balance sheets all over the world were tied together and that’s the crisis Wall Street created the leverage it securitized and sold subprime mortgages all over the world and it created the derivatives that tied balance sheets together who should be blamed is there anyone else well there are two alternatives that people like to propogate first we should blame the regulators and there there is some blame from the early 1990s the regulatory apparatus of the United States adopted a position that was different from the position that had adopted before which is we were gonna let the large banks manage their own risks because we trust them essentially in the 1990s of the 2000s the US and European financial systems had the trappings of regulation but in reality they were completely unregulated institutions you know there are many good books about the financial crisis but there’s one that I think has the best title that captures the essence of the crisis which is a book by Judge Richard Posner the title of which is a failure of capitalism and that’s what happened in the financial crisis it shouldn’t be a surprise unregulated banking systems fail all the time they go boom and bust the difference this time was the fact that the sheer size of the global banking system and its interconnectedness because of derivatives created a bust that had planet earth burned and the last thesis and is sometimes propagated it’s not Wall Street’s fault it’s not the regulator’s fault its Fannie Mae’s fault Fannie Mae and Freddie Mac you know I have a little history with Fannie Mae and Freddie Mac I began analyzing him in 1994 I think I was probably on the next 55 conference calls quarterly conference calls I analyzed them extensively I didn’t like them I thought they took too much risk I thought they manipulated the the political system but I like to blame people for what they actually did Fannie Mae and Freddie Mac did not cause the financial crisis this is a Shibboleth that is propagated by ideologues who were unwilling to admit that the financial system crashed because of the people who ran it Fannie Mae did buy some subprime mortgages it did cause a partially caused the demise of Fannie Mae but trust me on one thing if Fannie Mae and Freddie back had bought zero subprime mortgages the exact same thing would have happened because there were people lined up all over planet earth to buy them I thank you for your time and there’s a pleasure you


The coronavirus has thrown us into truly unprecedented times. Most countries have enforced a lockdown, and global travel has ground to a halt, and this, in turn, has had an enormous impact on the economy.

Stock markets all over the world experienced huge volatility. Wall Street suffered its worst day since ‘Black Monday’, oil prices went negative for the first time in history and governments all over the world have been implementing extreme fiscal and monetary policies.

Many analysts have suggested that rather than coronavirus being the cause of this economic downturn, instead, it was merely the pin that popped the bubble and the enormous debts that have been amounting since long before the 2008 global financial crisis was a disaster waiting to happen.

So, how do we get out of this mess? Who stands to benefit from government money printing? Who has to pay this money back? And, why the fuck is Steve Mnuchin, the Secretary of the Treasury?

To answer these questions and more, I am joined by leading finance experts: Andrea Ferrero, Andreas M. Antonopoulos, Caitlin Long, Ben Hunt & Raoul Pal. We look at the corruption and mismanagement of the economy by central banks and governments.

America’s Great Divide: David Axelrod Interview | FRONTLINE

David Axelrod is a political consultant who served as chief strategist for Barack Obama’s presidential campaigns and later as a senior adviser in the Obama administration.

Axelrod’s candid, full interview was conducted with FRONTLINE during the making of the two-part January 2020 documentary series “America’s Great Divide: From Obama to Trump.”

Watch Part One here:
And Part Two here:


It was a message he never expected to deliver. Henry Paulson—free-market thinker, former CEO of Goldman Sachs and Treasury secretary to a conservative Republican president—was unveiling to the world a massive taxpayer bailout of the American financial system. Afterward, as he headed into yet another weekend of nonstop work with his team, carrying the weight of the troubled markets on his shoulders, the former college-football star was clearly conflicted about what he’d just proposed. “It’s very unpleasant for me, but it’s a lot more attractive than the alternative,” Paulson told NEWSWEEK. “We can spend a lot of time talking about how it happened and how we got here. But we have to get through the night first.”

Let us hope the old saw, about the night being darkest before the dawn, is true. Recent weeks certainly have been the darkest Wall Street has seen since October 1929. Investment banks that had survived the Great Depression, the crash of 1987 and the trauma of 9/11—venerable names like Lehman Brothers and Merrill Lynch—fell by the wayside. They were just the latest victims in the subprime-mortgage and credit debacle that has taken down banks and lenders across the country, and yanked the dream of homeownership away from millions of Americans. For the past several months, the government’s solution to the problem has been to make a series of Solomonic decrees about who would live and who would die. Investment bank Bear Stearns? “Too big to fail,” the government decreed, arranging a sale of the firm to JPMorgan Chase. Lehman Brothers? It must be sacrificed and file for bankruptcy. Overextended homeowners? Try renting. The nation’s largest mortgage companies, Fannie Mae and Freddie Mac? Bail them out and let taxpayers foot the bill. AIG, the world’s largest insurer? Uncle Sam owns it now.

Wielding much of this power over financial life and death is this tall, calm man. Paulson came to Washington from Wall Street in 2006 expecting to deal with issues like Social Security reform and trade agreements. But the economy had other ideas. At a time when President Bush seems to have largely checked out, the teetotaling 62-year-old has emerged as the nation’s most powerful leader—the investment banker in chief. As he did on the Street, Paulson continues to advise CEOs on the best course of action, to arrange financing and to get the best terms possible for his clients. Only now his clients are American taxpayers, the president and the global financial system.

With the help of his counterparts at the Federal Reserve and the Securities and Exchange Commission, Ben Bernanke and Christopher Cox, Paulson has succeeded in fundamentally altering the relationship between Wall Street and Washington—almost to the point where D.C. is now the world’s financial capital. “There’s no doubt that he’s in charge,” says Roy Smith, a former partner with Paulson at Goldman and a professor at New York University. An indifferent orator—Paulson hunches his 6-foot-2 frame over lecterns and has a halting speaking style—the Eagle Scout has emerged as the pre-eminent market whisperer and cajoler of the American financial system. And yet Paulson has rankled some in Washington by conducting business like a Wall Street Master of the Universe: the marathon late nights and weekend meetings with a small group of people, followed by an unveiling of the result as a fait accompli.

“For Bear Stearns and AIG, members of Congress were simply informed that these were decisions made by the Bush administration, specifically Secretary Paulson and Chairman Bernanke,” says Barney Frank, chairman of the House Financial Services Committee. “I can’t tell you what they were thinking.” Paulson and Bernanke make an unlikely duo—the relentlessly forward-looking Christian Scientist investment banker from the suburbs of Chicago and the more placid history-minded Jewish economist from South Carolina. New York Federal Reserve president Tim Geithner has also been a key player.

The prospect of unelected officials putting massive amounts of taxpayer resources to work without transparency or approval from Congress, and without a clear process at work, is indeed troubling. In addition, the constant improvisation by Washington financial officials may be sending mixed messages. “There hasn’t been a consistent pattern,” New Jersey Gov. Jon Corzine tells NEWSWEEK. “We save Bear Stearns but not Lehman. The market is going to have a hard time sorting through what the underlying principle is.” (Corzine served with, and clashed with, Paulson when they were senior executives at Goldman in the 1990s.)

The Democratic strategist James Carville once said that he wanted to come back to life as the bond market, because it exerted such power over Washington policy. And for the past many years, Wall Street has been the tail that wagged the Washington policy dogderegulation, tax cuts on capital gains and dividends. No longer. Now Washington is dictating terms to Wall Street. And Americans will be dealing with the consequences of that for years to come.

How did we get here? And who is this guy who has become, almost by default, the face of American capitalism?

In many ways, Paulson was the ideal person to deal with this mess. A 32-year veteran of Goldman, he helped take the venerable (and venerated) company public and served as CEO from 1998 to 2006, an era in which the firm prospered. Goldman enjoys legendary status in New York, the elite among the elite. In the new book “The Partnership: The Making of Goldman Sachs,” Charles Ellis describes Goldman as a company with “such strengths that it operates with almost no external constraints in virtually any financial market it chooses.” Paulson, who excelled in the classroom (Phi Beta Kappa) and on the gridiron at Dartmouth (All-Ivy offensive lineman), worked in the Nixon White House as liaison to Treasury and Commerce before pursuing an M.B.A. at Harvard and joining the Chicago office of Goldman in 1974.

He became a partner in 1982 and helped build the firm’s Asian investment-banking business, making more than 75 trips to China. “Paulson was seldom thought of as a pal, a charmer, or particularly charismatic,” Ellis writes. But he was noted for self-discipline, focus on controlling risk and mastery of detail. He rose to Goldman’s leadership ranks in 1994 when the firm was in the midst of a major crisis, says Lisa Endlich, a former employee of the bank and author of “Goldman Sachs: The Culture of Success.” Nearly one third of the partners were leaving after the company had suffered significant trading losses. As senior executives made the case as to why partners should stay, Paulson focused on the nuts and bolts. “He described the minutiae of how they were going to cut costs and make money the next year,” says Endlich. In 1999, Paulson and a few other partners pushed out Corzine.

Paulson adheres tightly to the Goldman ethos: Make enormous amounts of money but don’t act like it (though Paulson’s stake in the firm was worth about $500 million when he cashed out in 2006, he wears a digital training watch, not a Rolex). Get involved in civic causes (he served for two years as chairman of the Nature Conservancy, and his cavernous corner office on the third floor of the Treasury Building is filled with photos of birds taken by his wife of 39 years, Wendy). And embrace the role of corporate statesman (in 2002, in the wake of corporate scandals, he gave a speech at the National Press Club calling for an improvement in corporate ethics).

Paulson had always been a Republican—but more a Rockefeller Republican than a DeLay one. Goldman Sachs was no place for ideologues or hyperpartisans—its ranks have been filled over the years with both Democrats (Corzine and former Treasury secretary Robert Rubin) and Republicans (White House chief of staff Josh Bolten) who went on to become public servants. It was Bolten who recruited Paulson to succeed John Snow as Treasury secretary in the spring of 2006. At first Paulson demurred. The ultimate realist, he doubted whether anything significant could be accomplished in the last two years of the Bush presidency. But Bolten made the case that there were other ways to contribute beyond the legislative agenda. And after Paulson and Bush met in the president’s study and talked for more than an hour, he agreed. With their children grown—their son, Merritt, owns minor-league sports teams in Portland, Ore., and their daughter, Amanda, is a reporter for The Christian Science Monitor—Henry and Wendy Paulson settled into a house in Washington.

Paulson instantly became the leader of Bush’s economic team. He had a very distinct idea of what the job would be—”the top policymaker in the administration, the chief economic adviser to the president and the top economic communicator,” says Tony Fratto, the White House deputy press secretary who worked at Treasury during the early portion of Paulson’s tenure. But the possibility that Paulson would make his mark seemed to evaporate when the Democrats assumed control of Congress a few months after his arrival. The new Treasury secretary had greater concerns than regime change on Capitol Hill, though. In his first official meeting with Bush at Camp David in July 2006, Paulson told the president it would be surprising if the United States made it through January 2009 without some disturbances. “We have these periods every 6, 8, 10 years, and there are plenty of excesses,” Paulson recalls telling Bush. He just didn’t know what those disturbances would be.

The problem became clearer as the housing bubble burst in mid-2006; borrowers started defaulting on mortgages and lenders began going belly up. The mortgages had been packaged into exotic securities, sliced and diced and sold as bonds and purchased by investment banks and hedge funds. Because lenders, executives and traders had convinced themselves that home prices would never fall, anything went. The result was debt layered on debt, piled on top of debt, supported by small amounts of cash. And so as Americans in increasing numbers defaulted on their mortgages in 2007 and 2008, it kicked off a domino effect. The value of the mortgage-backed bonds fell, as did that of the financial instruments based on those bonds. Banks were forced to write down the value of their holdings and raise new cash from foreign sovereign-wealth funds—only to report fresh losses as the housing market weakened. This past spring, the chain connecting underwater subprime borrowers to New York investment banks and Fannie Mae and Freddie Mac—the Washington-based quasi-governmental firms that together guarantee or insure $5.4 trillion in mortgages—grew increasingly taut.

The government response to the housing mess took two main forms. The Federal Reserve slashed interest rates repeatedly, hoping to make life easier for borrowers and lenders. And under Paulson’s direction, the Treasury Department put together the Hope Now coalition, an industry-led group that would modify mortgages before foreclosure. But by the time such efforts got started, too many dominoes had fallen.

In March, when Bear Stearns, the perennially troubled teen of Wall Street, got in too deep, Paulson hammered out a deal for JPMorgan Chase to access credit from the Federal Reserve to buy the investment bank at a bargain-basement price of $2 per share (later revised upward to $10 a share), because he didn’t want to make it seem as if public shareholders were being bailed out. Paulson knew the plan flew in the face of the free-market philosophy to which he, and all his colleagues on Wall Street, clung so fiercely. But this was a special case. When commercial banks failed, a tried-and-tested procedure kicked in: the Federal Deposit Insurance Corp. took charge and made insured depositors whole. But there was no existing protocol or regulatory framework to deal with the failure of an investment bank. And because of its massive levels of debt and significance in the markets for credit-default swaps—a sort of insurance policy against investment losses—Bear Stearns had the capacity to harm hundreds of financial institutions. “The Federal Reserve believed—and I supported them—that it was the right thing to come in and intervene,” Paulson tells NEWSWEEK.

The downfall of Bear Stearns sent Paulson and his colleagues into crisis mode—a mode they have yet to exit. For Paulson and his team at the Treasury Department, the summer was a string of ruined weekends. In July, Congress gave him authority to come to the aid of Fannie Mae and Freddie Mac. “If you’ve got a bazooka, and people know you’ve got it, you may not have to take it out,” Paulson said. (Translation: if the market knew the companies had a federal backstop, investors would be more likely to give them more time to work out their troubles.) Paulson was forced to use the bazooka sooner rather than later. By the end of August, the weakened financial state of the two giants was threatening both domestic mortgage markets and the value of hundreds of billions of dollars’ worth of bonds they had issued that were owned by central banks around the world.On the morning of Sunday, Sept. 7, the government essentially nationalized Fannie Mae and Freddie Mac, agreeing to backstop their debt and provide new capital.

Given the unique nature of this financial crisis, Paulson—who spent his entire private-sector career at Goldman—has been a better fit for this job than his predecessors in the Bush administration. Snow ran a railroad company, and Paul O’Neill headed the aluminum producer Alcoa. Paulson, as Bolten notes, has the credibility and the respect of the markets, as well as power and authority. As a result, he has operated with considerable autonomy. “President Bush has delegated a great deal to me, and it’s an awesome responsibility,” Paulson says. “He’s very supportive.” The two Harvard M.B.A.s have spoken at least once daily for the past several weeks, in addition to having regular meetings. One reason Treasury has emerged as the leader in this crisis, more than the Federal Reserve, is that the problems in the main aren’t in the banks that are part of the Federal Reserve system. They are in the unregulated Wall Street investment banks, which are Paulson’s turf.

The key skill of an investment banker is understanding the thinking, motivations and fears of the person on the other side of the table. And Paulson has had to put all his skills to the test. Over the second weekend in September, when Lehman Brothers came seeking the kind of help that the government had given Bear Stearns, Paulson was conflicted about what to do. He was reluctant to set a new precedent and encourage what’s referred to in the world of economics as “moral hazard”—the notion that the existence of a backstop would encourage further reckless behavior. Paulson essentially told Lehman CEO Richard Fuld, whom he knew from his days on Wall Street, that the bank needed to find a buyer in the wake of new losses. But Fuld dithered. And although Lehman was in bad shape, unlike Bear Stearns it didn’t threaten to bring down the whole system. “I never once considered that it was appropriate to put taxpayer money on the line in resolving Lehman Brothers,” Paulson said at a press conference in Washington. His refusal essentially forced Lehman into a bankruptcy filing and spurred Merrill Lynch to seek a deal with Bank of America. At Lehman, workers set up photos of Fuld and Paulson and stuck pins through their eyes.

Asked at that press conference if the public should interpret the refusal to help Lehman as an end to assistance for the financial sector, Paulson was cagey. He said he had to worry first and foremost about the “stability and orderliness of our financial system.” He went on to prove his flexibility less than 24 hours later, with AIG. The gigantic insurer, which is a component of the Dow Jones industrial average, had several healthy units in its core business. But its AIG Financial Products unit, which had sold large volumes of credit-default swaps on subprime mortgages, was deep underwater. Were it to fail, AIG would pose the same systemic risk to the financial system that Bear Stearns had. Paulson informed congressional leaders that the government was coming to AIG’s rescue. Using the Fannie/Freddie rescue as a template, he hammered out an aggressive deal. He installed a new CEO and extended $85 billion in credit—at a high interest rate—in exchange for an 80 percent stake in the company.

But given the uncertainty about who might fail next, the markets continued to panic. Investors turned against the only healthy players left on Wall Street, Morgan Stanley and Goldman Sachs, pummeling their stocks and threatening to force them into mergers with other firms. Banks began to lose confidence in one another, cutting off the flow of capital. Concerns arose even about money-market accounts, long considered among the safest of investments. Paulson again took out the bazooka: he and Bernanke crafted their plan to create a taxpayer-backed entity that would acquire mortgage-backed bonds from banks, and requested $700 billion from Congress to do so. Treasury also temporarily extended insurance to money-market funds. By the end of last week the stock markets were soaring.

While bailouts are regrettable and expensive, Paulson argues that one is needed to restore confidence in the system. “We’re going to have housing issues and mortgage issues for years,” he tells NEWSWEEK. “The key is to get stability.” But unlike other recent actions, this one will require greater cooperation from Congress. And there Paulson is likely to run into some roadblocks.

Paulson works at a pace to which Washington isn’t quite accustomed. All month the staff dining room at Treasury has remained open on weekends, with a buffet of tuna-fish and peanut-butter sandwiches. Paulson doesn’t use e-mail and prefers to get information by phone. Staffers refer to him as a “serial dialer.” But he doesn’t spend a lot of time making small talk. “He’s a no-bulls––t kind of guy,” says Barney Frank. “He gets down to business and gets things done.”

This brusqueness, and the desire to move on to the next problem, doesn’t always go over well on Capitol Hill. The criticism of Paulson has come mostly from conservative Republicans in the House who are incensed over the bailouts. “I think for all intents and purposes, Congress has been left out of the loop and treated after the fact,” says Rep. Scott Garrett, a New Jersey Republican. Having already acquiesced to the creation of hundreds of billions of dollars in potential taxpayer obligations, Congress isn’t likely to just hand over hundreds of billions more without demanding some concessions like assistance for strapped homeowners.

The decisions made on the fly these past several months will have impacts that last deep into the next administration, long after the end of Paulson’s tenure—perhaps one of the most eventful of any Treasury secretary since Alexander Hamilton. To add to his burden, Paulson has been tasked with briefing Sens. John McCain and Barack Obama on the situation. Late last Thursday evening, as Obama was about to fly from New Mexico to Florida, he held his plane on the tarmac for 10 minutes to hear the latest from Paulson, just one of many recent conversations. McCain and Paulson have also spoken on several occasions.

The Treasury secretary, who repeatedly describes the bailouts as “unpleasant” but necessary, knows that the United States will now be the international butt of jokes for nationalizing huge chunks of its once vaunted financial system. But as the Wall Street saying goes, it is what it is. At the end of the Street’s craziest week in recent memory, Paulson was still working the phones and facing another ruined weekend, in which he and congressional leaders would iron out the details of the bailout plan. “Like every other weekend, we’ll just be working hard doing what we need to do,” Paulson said. For all our sakes, let’s hope there won’t be many more marathon weekends in the months ahead.