That article is like a ricocheting bullet, bouncing back and forth between aspersions that Paulson was favoring Lehman over other banks and that he failed to grasp the real reason for the crisis. Let's just synopsize a long text into two, core elements.
Firstly, Fiderer ignores the broad measures taken under TARP that benefitted a lot of players, small and large, in both banking and commerce sectors. TARP was not a patronage for his alma mater at Goldman Sachs or the JPM rogues. So I give him an F on this half of his diatribe.
Secondly, I think both Fiderer and Paulson miss the mark to at least some extent on causality. I think Fiderer confuses the mechanics and conveyances of failure with the causes of failure. And I think Paulson overweights blame on socially engineered mortgages although he avoids assigning all blame on that issue which some dismiss as total bunk. I am not one of those people.
My view is that the bubble was created via a combination of systemic and endemic forces that combined to ignite and blow up. The systemic forces (inside the mortgage banking system) were replacing a risk management culture with a bonus enhancement culture, banks moving beyond traditional lending boundaries in fear/retaliation for FnF expansionism (FM Watch) and, yes, some pressure from mandated low income mortgages created by government meddling.
On the endemic (macro) side, contributing forces were the Bush tax cuts that drove home upgrades as investments in a stagnant equity market, aspirational greed, (too) easy money pushed by lenders, entry of internet lending competition via Lending Tree and Quikken and migration of middle-income jobs overseas... remember "downsizing" and "right-sizing" in every company's business plan... degrading many homeowners incomes to service sector, degraded levels.
The economic crisis was on a liquidity level. The most vulnerable major players on the housing side in a liquidity squeeze were the GSEs. They didn't create the problem They were, however, in triage as the most heavily wounded. That's why Paulson concluded they needed to be bailed out. We can all argue his call's rationale, but I, for one, do not have a reason to question his motives as anything but patriotic and sincere.
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