Henry Paulson's Blunder

The financial crisis the world is currently experiencing was exacerbated by a single event - the collapse of Lehman Brothers. By allowing this to happen, Paulson caused chaos in the world markets creating the necessity for billions of dollars of tax payers money to be pumped into banks and financial markets.

Henry Paulson will be remembered for this single largest blunder of his life. Had he acted swiftly and not decided to let Lehman collapse, the inter-bank lending freeze that followed could have been averted. For fear of total loss, banks around the world stopped lending money to each other and that halted the entire financial system.

Banks and financial institutions suffering from sub-prime crisis would still have needed capital, but the extent and urgency to act virtually overnight would not have been there. Governments around the world are now risking trillions of dollars of tax payers money.

Henry Paulson was probably a good CEO of Goldman Sachs under the system that has since collapsed and is discredited. But for him to manage the $700 billion bailout with a handful of his former Goldman colleagues is a serious conflict of interest. These funds should be managed by an independent agency comprised of people with no vested interests.

I still believe that Bush Administration should have availed the services of Mr. Warren Buffet to manage the bailout and he probably would have even made some money for the taxpayers. Some may say that Mr. Buffett too has vested interest as he invested in Goldman's recently. I believe that is small change for Mr. Buffett and he is above all this anyway.

Let Warren Buffett Manage the Financial Bailout

Congress is rightly concerned about how and who will manage the bailout. There is no doubt that banks should not be given blank checks at arbitrary pricing for their toxic assets. Also, the Senior Executives of banks benefiting from the bailout must also agree to forgo bonuses for a number of years.

The markets need a quick positive signal from Congress, delays could bring down the entire financial world. Congress should pass a simple bailout package without getting bogged down into the hows and whys. They should request Warren Buffett to manage the entire bailout package. He is the shrewdest investor and will drive hard bargains with banks before giving them a dime. Let him impose conditions as he deems fit. He is already of the opinion that bankers will have to give up bonuses for a while.

Going by Warren's track record, an investment of $700 billion of tax payers money will probably come back to the treasury as $1 trillion. All he needs is a handful of good people to help him manage this.