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The 2008 Mortgage Crisis: Henry Paulson

1141 words - 5 pages

Background
Henry Paulson is a banker who served as the 74th US secretary of the treasury. Born in 1946, Paulson is internationally recognized as the economist who came up with a solution to the 2008 mortgage crisis. Paulson introduced the bailout package in an effort to assist institutions that were at the brink of collapse. Paulson early career began at the pentagon where he worked as the staff assistant for the assistant secretary of defense (1970-1972). Paulson also worked as an assistant to John Ehrlichman from 1972-9173 during presidents Nixon’s administration. However, his most notable profession was at Goldman Sachs. Paulson joined Goldman in 1974. Goldman Sachs is notable investment ...view middle of the document...

Reduced barriers will make commodities and services accessible and affordable o the public. When Paulson took over the position of the secretary of treasury he noted that the gap between the wealthy and the underprivileged was quite broad. In the emergence of the credit crisis, Paulson came up with the idea of overhauling the existing financial regulatory system. Paulson strived to create a financial system that is adjustable and can easily acclimatize to change. Paulson indicated that the economic environment is constantly changing thus a flexible financial system will be a guarantee to protect investors and consumers. When the economic crisis began to threaten the existence of various institutions, Paulson established a bailout, takeovers, and buyout plan. Institutions such as Bear Stern and Fannie would not have been salvaged (Woll, & Cliff, 61).
The supply-sided economy and an economic philosophy that emphasizes on saving, spending and investing would see consumers enjoy an economic environment that foster growth. Paulson managed to create an environment that is stable, orderly and had a liquid financial market. Paulson strategy cushioned many consumers from the harsh realities of the crisis. Paulson’s strong connections with china saw the US establish the US-China strategic economic dialogue. The purpose of the dialogue meeting was to enhance economic co-operation between china and the United States. When the strategic dialogue was finalized, china began to open its financial and service sector to US investors. Additionally china began to lower its subsidies. The American exporter got an additional market for its products in China. Paulson was also helpful in establishing a strategy that helped homeowners that were at risk of losing their homes. The establishment of the New Hope alliance, for instance, was a program that involved the government and sub-prime mortgage lenders. The hope program helped homeowners at risk of losing their homes to establish modified mortgage servicing
Economic principles
There are several principles that best explain economist Paulson. The first is that people face trade off. This principle explains that it is impossible for people to get everything they want at the same time. People must trade one activity for another. Trade off thus involves making of choices and determining the ideal choice to adopt. Paulson took over as the secretary of treasury just when the country was getting into the economic crunch. When he established the bailout plan, not all institutions could benefit. Whereas some like the Lehman brothers collapsed, others like Bears Steams were taken over by JP Morgan. This was the only way...

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