The United States of America Hedge Fund

Secretary of Treasury Hank Paulson is the former CEO & Chairman of Goldman Sachs (from 1998 to 2006). Goldman Sachs has been the most profitable firm on Wall Street as it managed its' own private hedge fund. In June 2006, Paulson was approved by the Congress as Treasury Secretary. The current economic crisis became very public in September when Lehman Brothers was forced into bankrupcy. Subsequently, the Congress passed a $700 million bailout (the TARP) that was left more or less to the discretion of Secretary Paulson. Secretary Paulson has probably spent half of the money funding various Financial institutions. The typical deal requires the Bank to pay interest of 8% and for the government to receive stock warrants. Paulson & Bernanke have also funded other programs granting liquidity to the markets. The big question is 'will the taxpayer make a profit/loss on these investments'. As I wrote yesterday, five year treasury bonds are yielding 1%. The government is borrowing money at 1% and receiving 8% or more from the various financial institutions. This is profitable.

Random thoughts....What if all of these Banks & Insurance companies write down the
paper losses on all of the mortgage loans so low that they eventually make a profit (in two to five years) as less loans default than expected... This will create an upside explosion in Financials and a huge profit for the government...I think this is more than a 'what-if'.....