The ire in Paulson's quote is directed not against speculators generally, but speculators who don't live up to their agreements when things move against them.
That's not really something Goldman is guilty of. ...As much as people would like them and everyone ever associated with them to be guilty of everything.
I'd give Goldman a pass. They really are the best at what they do.
But if we expand it further to the rest of the financial industry, what can we see?
Back in November, 33 companies skipped their TARP payments.
Just recently, Blackrock walked away from a Manhattan building as they couldn't refinance the debt.
And that's the problem-- banks and homeowners get into financial, not moral contracts. If the loss off default is smaller than the loss of staying in the contract, you stop paying. Companies do it all the time, and homeowners should view it as an out.
"Just recently, Blackrock walked away from a Manhattan building as they couldn't refinance the debt."
Were the companies which skipped their TARP payments capable of paying?
There is a difference between being unable and unwilling to pay.
Sounds like unwilling to me. Just because they couldn't refinance that debt doesn't mean they are unable to pay it.
For instance, if Blackrock manages two pension funds (e.g., Target Retirement 2050 and 2040), they can't raid TR2050 to pay for obligations owed by TR2040.
The non-recourse loan agreement spells: the loan is secured by the property the loan it taken against, and if the borrower defaults the property is repossessed by the bank.
The recourse-loan agreement spells: the loan is secured by the property the loan it taken against and all borrower's assets (except secured protected assets such as 410k or IRA). If the borrower defaults the property and assets are repossessed by the bank via bankruptcy proceedings.
The Paulson's quote is exactly an attempt to guilt people into taking more responsibility than their contract requires. Something GS would never do.
No they got bailed out before they had to. A luxury that no homeowner who defaults has yet seen.