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Too Big to Bail: The "Paulson Put," Presidential Politics, and the Global Financial Meltdown

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  • Thomas Ferguson
  • Robert Johnson

Abstract

This paper is the second part of our study of the world financial crisis. Part I, "From Shadow Banking System to Shadow Bailout," appeared in the previous issue of this journal (Ferguson and Johnson 2009). The discussion centers on the "Paulson Put" that defined the "Shadow Bailout"—the effort by the Treasury and the Federal Reserve to put off high-profile financial bailouts until after the 2008 presidential election. The role Fannie Mae and Freddie Mac played in the collapse of the Paulson Put is traced at length, along with the failure of Bear Stearns and the eventual nationalization of the GSEs (government-sponsored enterprises). The Lehman bankruptcy receives detailed attention in the context of the U.S. presidential election. John Taylor's recent arguments about the relative (un)importance of the Lehman episode are examined and rejected. The establishment of the Troubled Asset Relief Program (TARP) and its aftermath are also examined in some detail.

Suggested Citation

  • Thomas Ferguson & Robert Johnson, 2009. "Too Big to Bail: The "Paulson Put," Presidential Politics, and the Global Financial Meltdown," International Journal of Political Economy, Taylor & Francis Journals, vol. 38(2), pages 5-45.
    • Handle: RePEc:mes:ijpoec:v:38:y:2009:i:2:p:5-45
    DOI: 10.2753/IJP0891-1916380201
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    Cited by:

    1. Edward Kane, 2010. "Redefining and Containing Systemic Risk," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 38(3), pages 251-264, September.
    2. Mario Sarcinelli, 2010. "Past and future regulation to prevent a systemic financial crisis," PSL Quarterly Review, Economia civile, vol. 63(253), pages 103-129.
    3. Eugenia Correa & Alicia Girón, 2013. "Public expenditure and deficits: the emerging countries’ financial circuits and crises," Chapters, in: Louis-Philippe Rochon & Mario Seccareccia (ed.), Monetary Economies of Production, chapter 12, pages 181-194, Edward Elgar Publishing.
    4. Domenica Tropeano, 2011. "The Monetary Policy Response to the Financial Crisis in the Euro Area and in the United States: A Comparison," Palgrave Macmillan Books, in: Pompeo Posta & Leila Simona Talani (ed.), Europe and the Financial Crisis, chapter 2, pages 28-45, Palgrave Macmillan.
    5. Wosnitza, Jan Henrik & Denz, Cornelia, 2013. "Liquidity crisis detection: An application of log-periodic power law structures to default prediction," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(17), pages 3666-3681.
    6. Parmendra Sharma & Eduardo Roca, 2011. "Reâ Designing Financial Systems: A Review of the Role of Stock Markets in Developing Economies," Discussion Papers in Finance finance:201120, Griffith University, Department of Accounting, Finance and Economics.
    7. Edward Kane, 2018. "Double Whammy: Implicit Subsidies and the Great Financial Crisis," Working Papers Series 81, Institute for New Economic Thinking.
    8. Casselmann, Farina, 2013. "Financial services regulation in the wake of the crisis: The Capital Requirements Directive IV and the Capital Requirements Regulation," IPE Working Papers 18/2013, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    9. Thomas Ferguson & Paul Jorgensen & Jie Chen, 2016. "How Money Drives US Congressional Elections," Working Papers Series 48, Institute for New Economic Thinking.

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