Henry “Hank” Paulson was the CEO of Goldman Sachs for many years. He has too many friends in the financial sector as well as on Wall Street. The man should never have been selected by President G.W. Bush, but he was and at the time everyone thought it was a great idea.
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Why was it a great idea? Because at the time the markets were recovering from the tech bubble collapse in the Stock market. He was also one of the guys who help redesign the hedge funds (another reason we have this financial meltdown) as well as pushing the idea of sub-prime mortgages. The Democrats loved him because he was full-filling the “American Dream”, getting everyone into the house they wanted, no matter what.
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It’s now come to a point that he’s out-lived his usefulness in the Treasury Department. He’s been having press conference after conference in just the last couple of weeks that shows that he doesn’t even know what to do for the economy while still trying to help his cronies within the financial sector.
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I’m counting down the days until Paulson will be out of the position. The job will now fall on Obama‘s choice for Secretary of Treasury. Timothy Geithner will fill that position next month. The man has a long history with the economy and the Treasury department as well as being in charge of the New York Federal Reserve. Timothy Geithner has made a name for himself on Wall Street and some of the rallying in the markets last week was most likely due to the decision.
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Unfortunately the rally the only last so long in what is now “officially” a recession. That’s right the news was released Monday. The economic advisors and experts have now made it official. Like anyone with a half a brain couldn’t see that two months ago.
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The markets typically show the signs of a recession before it actually is made official. With that in mind, it’s nice to think that a recession is usually 8-12 months long. Looking back the markets have been showing signs of it for at least four months, which means that we can be half way through this mess already.
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As I’ve been saying for the last to months, build up some capital (40%-60% of your portfolio) and wait for the right time to buy to build a new position in the stock market. That time is just about upon us, so I say when the DOW reaches 7500 points again, start putting your money to work behind all that research that you’ve been doing.

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Citigroup (NYSE:C) Is now the center of attention now within the financial sector. Of course it’s expected since they too were doing what the rest of the industry has been doing for the last few years.
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Over the weekend the Federal Reserve and the Treasury department have been talking on how to stabilize the company. The discussions are still going on and not much more is being revealed. Speculation is that they are thinking of assuming some of the risky assets held by the company. As with the rest of the trouble assets that the government has taken over from the other troubled banks. Removing the assets off of Citigroup’s balance sheet will give them the chance they need to put them in a better position to do business and raise capital.
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From all the news coverage I’ve followed over the last few days, Citigroup has declined to comment.
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I was on vacation last week and while spending my time with my family, I didn’t follow any news, but to come back to find out that Citigroup lost nearly 60% of their stock value brought me back to reality real quick. Having Citigroup collapse could possibly bring the end to the entire sector. They are too intertwined within the sector.
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When you think about it, it shouldn’t be a surprise that this is happening. Look what happened to Citigroup last month when they tried to acquire Wachovia (NYSE:WB). They lost the opportunity to Wells Fargo Corp (NYSE:WFC). They are no longer the big dog on the block. As a matter of fact they are probably the most vulnerable of all the financial institutions out there.
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Who knows what is to come this week. Last week the DOW lost 5% and that’s after the 500 point gain on Friday. I’m going to catch up on the thing I missed and watch the action from the sidelines.

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Today five of the most powerful men in the hedge fund world are in Washington speaking to the Oversight committee. The were invited (told) to testify in Washington to the effect that hedge funds had in the economic crisis that is upon us now.
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George Soros Of Soros Fund Management, John Paulson of Paulson & co., Jim Simons of Renaissance Technologies along with Citadel Investment Group’s founder Ken Griffin appeared in front of Committee Chairman Henry Waxman.
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Ironically they agree that there needs to be more transparency from the industry of secretive funds. They also gave different views on whether or not they contributed th the financial crisis. George Soros di say that hedge funds were part of the reason for the financial bubble. Mr Soros wrote in a statement “A deep recession is now inevitable and the possibility of a depression cannot be ruled out,” sent to the Oversight and Government Reform Committee hearing.
This is the ma who is know for betting against the British pound back in 1992 and recently backing Senator Barack Hussein Obama for President.
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The Committee wants to hear from the leaders in the hedge fund industry about the role of these funds as well as their tax status and regulation. Oddly enough when the financial and economic world was falling apart, these gentlemen made on average $1 billion last year. That is also why they were called to appear in Washington.
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“Currently, hedge funds are virtually unregulated,” Waxman said. “They are not required to report information on their holdings, their leverage, or their strategies. Regulators aren’t even certain how many hedge funds exist or how much money they control.”
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I don’t know about you but this is quite fishy. Why is it that these guys can do what they do and not have to be accountable for their actions? Yes I know that many of them are operated outside of the United States, but they trade in U.S. currency and it’s assets.
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I also know that they are not the only reason for the collapse of the financial industry. Most of that blame does have to fall on the managers of those institutions, rating agencies, investment banks as well as the people who over-extended themselves with credit.
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As to the regulations that were non-existing for the last several years. Most of that blame must be put on Congress, the Treasury Dept. and the Federal Reserve. It’s their job to keep things in order. Unfortunately, many of those politicians were re-elected. Barney Frank, Henry Dodds along with Obama who was able to deflect most of the blame during the election. We will have to wait until 2010 before we have a chance to remove some of these lazy, elected government officials.
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David Ruder, a former chairman of the U.S. Securities and Exchange Commission tried a few years ago to force the hedge funds to register with the agency, but failed was also present at the hearing.
“Although hedge funds have been active participants in the financial markets during the past years, they do not seem to have played a major role in the events precipitating the crisis,” Ruder told the hearing.
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The men who were summoned to the hearing today are some of the leaders in the hedge fund industry. These guys are known by playing by the rules. The bad thing is that there aren’t that many rules for them to follow. Many of the hedge funds that we’ve been hearing about going under are the less respectable ones. The ones that don’t really follow any rules and leveraged the hell out of their funds.

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