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On the Brink: Inside the Race to Stop the Collapse of the Global Financial System Paperback – Bargain Price, February 15, 2011

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When Hank Paulson, the former CEO of Goldman Sachs, was appointed in 2006 to become the nation's next Secretary of the Treasury, he knew that his move from Wall Street to Washington would be daunting and challenging.

But Paulson had no idea that a year later, he would find himself at the very epicenter of the world's most cataclysmic financial crisis since the Great Depression. Major institutions including Bear Stearns, Fannie Mae, Freddie Mac, Lehman Brothers, AIG, Merrill Lynch, and Citigroup, among others-all steeped in rich, longstanding tradition-literally teetered at the edge of collapse. Panic ensnared international markets. Worst of all, the credit crisis spread to all parts of the U.S. economy and grew more ominous with each passing day, destroying jobs across America and undermining the financial security millions of families had spent their lifetimes building.

This was truly a once-in-a-lifetime economic nightmare. Events no one had thought possible were happening in quick succession, and people all over the globe were terrified that the continuing downward spiral would bring unprecedented chaos. All eyes turned to the United States Treasury Secretary to avert the disaster.

This, then, is Hank Paulson's first-person account. From the man who was in the very middle of this perfect economic storm, On the Brink is Paulson's fast-paced retelling of the key decisions that had to be made with lightning speed. Paulson puts the reader in the room for all the intense moments as he addressed urgent market conditions, weighed critical decisions, and debated policy and economic considerations with of all the notable players-including the CEOs of top Wall Street firms as well as Ben Bernanke, Timothy Geithner, Sheila Bair, Nancy Pelosi, Barney Frank, presidential candidates Barack Obama and John McCain, and then-President George W. Bush.

More than an account about numbers and credit risks gone bad, On the Brink is an extraordinary story about people and politics-all brought together during the world's impending financial Armageddon.

Read the Author's Note from On the Brink

The pace of events during the financial crisis of 2008 was truly breathtaking. In this book, I have done my best to describe my actions and the thinking behind them during that time, and to convey the breakneck speed at which events were happening all around us.

I believe the most important part of this story is the way Ben Bernanke, Tim Geithner, and I worked as a team through the worst financial crisis since the Great Depression. There can't be many other examples of economic leaders managing a crisis who had as much trust in one another as we did. Our partnership proved to be an enormous asset during an incredibly difficult period. But at the same time, this is my story, and as hard as I have tried to reflect the contributions made by everyone involved, it is primarily about my work and that of my talented and dedicated team at Treasury.

--Henry M. Paulson

Amazon Interview: Henry M. Paulson on On the Brink

We spoke with Henry M. Paulson in late January 2010, just before the release of On the Brink. You can listen to parts one and two of the Omnivoracious Podcast of the interview, and read a full transcript, in addition to these excerpts:

Amazon.com: You accepted the job as Treasury secretary in 2006, with some reluctance. Did you have any idea what you were getting into?

Paulson: I had a pretty clear idea that there would be a credit crisis sometime when I was in Washington. And I told the president I thought there'd be one, and the first major meeting I had with him I spent just talking about that topic. But I did not anticipate a crisis of the magnitude we faced--didn't anticipate that at all--and I certainly was bordering on naive in my understanding of the regulatory powers and authorities in Washington.

Amazon.com: You talked about [Ben] Bernanke's great knowledge of history. How much of a guide could history be?

Paulson: I can answer that two ways. First of all, history is a guide in one very real sense: that if you let the financial system collapse, and don't do enough to stave off disaster, the people who are going to suffer, the innocent victims, are going to be the American people. It's not going to be the banks, or the financial sector. So you need to do everything you can to put out the fire before it gets out of control. I think to that extent history was an important guide.

Otherwise, there wasn't much you could learn from history. That's a big lesson, but we were dealing with a financial system and markets very different from what had existed many years ago. Huge concentration in the industry, so if you had two or three firms go down in succession you'd have a domino effect. The whole system could collapse, and it wouldn't take much to have unemployment levels equal to what we had at the Great Depression, and it could happen very quickly. And we didn't have the tools we needed to work with. The regulatory system hadn't been updated since the Great Depression, essentially; the regulatory authorities hadn't. We didn't have the authorities for dealing with major non-banks, and winding them down. So in many ways what were doing was we were dealing with--I said in the book--duct tape and baling wire. We were making do with the authorities we had, which were woefully inadequate.

Amazon.com: And scrambling to get more authories.

Paulson: And scrambling to get more authorities. And in many ways this book is the story of the collision of politics and markets, and it's the story of a race against time to get more authorities. And I think one of the things that really comes through in the book is all of the different elements of the crisis that were coming at us simultaneously.

You could just see it. We could see it and it was one of the most frustrating--when I look at the things I could have done better, there were a lot of them and they come out in the book, but the communications challenges were huge. I mean, I sat there when the capital markets froze, before we went to Congress, and the money markets weren't working, and I just tried to think about how to explain this. Because I knew--I was seeing major, blue-chip industrial companies that were having trouble raising financing, so I knew with $3.4 trillion of money market funds, and with everything that was just getting ready to break apart, that if the system had collapsed there'd be thousands and thousands and thousands of mainstream industrial companies--middle-sized companies, large companies--that wouldn't be able to raise their short-term funding, finance their inventories, pay their people. People wouldn't have been able to pay their bills. This would have rippled through the economy. We would then have had--well, today we have over 10% unemployment. That's terrible. And that's after everything we've done. If the system had collapsed, when we were on the brink, unemployement easily could have been at the 25% level that we saw at the Great Depression, and the value destruction--much greater than we've had in terms of home prices and in terms of people's savings accounts and stock portfolios and so on.

Amazon.com: And now it looks like 2010 is going to be the year that the Obama administration tackles financial reform. In the last section of your book you mention some lessons that you took out of the crisis.

Paulson: Yeah, this is absolutely critical. And I am not shocked but very unhappy we don't have this yet, because people in this country are angry. Now they're very angry about bonuses and compensation levels on Wall Street, and rightfully so, after everything that's been done to save Wall Street. But what they should be angry about is that we have a system that made this necessary. And so what we need to do is we need to channel some of that anger toward fixing the system so never again do we have major financial institutions that are too big to fail.

Amazon.com: And do you worry that the further we get from the crisis the harder it will be to make those necessary reforms?

Paulson: Of course I do. The thing I worry about the most is I don't want another Treasury secretary to ever be sitting there like I was, without the tools and authorities you need to protect our country, protect our economy, and protect the people. It's a helpless feeling and it's a terrible feeling, and we should never be in this place. Our authorities need to be updated, our financial regulatory structure needs to be updated, and I'm optimistic about the future if we do this.

If we don't, we will have another crisis. You always do. That's the history of mankind. If you go back, as long as we've had banks and financial institutions, there have been excesses, no matter how hard you try to avoid them, and there are going to be financial crises, and we need the tools in place and the regulatory system in place to be able to have a better visibility into what's going on and then be able to put out the fire when it starts, without costing the American people as much as this one did.

Read the full interview.

--This text refers to an out of print or unavailable edition of this title.

From Publishers Weekly

Paulson (U.S. Treasury Secretary from July '07 to January '09) has come under sharp criticism from both sides of the political spectrum for his role in bailing out the banks. In this fast-moving, insider's account of "the worst financial crisis since the Great Depression," he tells his side of the story. Working closely with Treasury Secretary Timothy Geithner (then president of the New York Federal Reserve Bank) and Ben Bernanke (chairman of the Federal Reserve Board), he cobbled together a series of rescue operations to prevent the collapse of major U.S. financial institutions. Paulson, and the rest of the team who worked tirelessly to avert an economic catastrophe, command respect, but his contention that their actions were the only possible approach to the crisis leaves many open questions. He has little of substance to say about the precipitating events, and his equally Reaganesque and Kafkaesque calls to get "the government out of the private sector as quickly as possible" result in a somewhat unconvincing page turner.
Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved. --This text refers to an out of print or unavailable edition of this title.

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Product Details

  • Paperback: 512 pages
  • Publisher: Business Plus; Reprint edition (February 15, 2011)
  • Language: English
  • ISBN-10: 0446561940
  • ASIN: B006CDD6K0
  • Product Dimensions: 8.8 x 6 x 1.4 inches
  • Shipping Weight: 1.2 pounds
  • Average Customer Review: 3.9 out of 5 stars  See all reviews (162 customer reviews)
  • Amazon Best Sellers Rank: #723,186 in Books (See Top 100 in Books)

More About the Author

Henry M. Paulson, Jr. served under President George W. Bush as the 74th Secretary of the Treasury from June 2006 until January 2009. Before coming to Treasury, Paulson was Chairman and Chief Executive Officer of Goldman Sachs since the firm's initial public offering in 1999. He joined Goldman Sachs Chicago Office in 1974 and rose through the ranks holding several positions including, Managing Partner of the firm's Chicago office, Co-head of the firm's investment Banking Division, President and Chief Operating Officer, and Co-Senior partner.

Prior to joining Goldman Sachs, Paulson was a member of the White House Domestic Council, serving as Staff Assistant to the President from 1972 to 1973, and as Staff Assistant to the Assistant Secretary of Defense at the Pentagon from 1970 to 1972.

Paulson graduated from Dartmouth in 1968, where he majored in English, was a member of Phi Beta Kappa, and an All Ivy, All East football player. He received an M.B.A. from Harvard in 1970.

Customer Reviews

This book can be hard to understand for those not familiar with the nuts and bolts of financial products.
I am surprised that Mr Paulson did not exhibit his usual temerity and ten second treatment of the AIG bailout and the ' No Haircuts ' for Goldman Sachs.
libertarian reader
I rated the book high ... not because it's a good read, but because everyone should read this to see what these elitists are really like.
Todd B. Marshall

Most Helpful Customer Reviews

16 of 19 people found the following review helpful By HJ Szczesniak on October 31, 2012
Format: Paperback Verified Purchase
"Between March and September 2008, eight major U.S. financial institutions failed - Bear Stearns, IndyMac, Fannie Mae, Freddie Mac, Lehman Brothers, AIG, Washington Mutual, and Wachovia --- six of them in September alone.....This, the most wrenching financial crisis since the Great Depression, caused a terrible recession in the U.S. and severe harm around the world. Yet it could have been so much worse."

Thus Hank Paulson summarizes, in the Afterword, the major challenges he faced as Secretary of the Treasury, a post he assumed on July 10, 2006 and left on January 16, 2009. And this does not mention other institutions that would have failed had they not been propped up (GE Capital, Chrysler, GM, and the entire money market industry after the Reserve Primary Fund broke the buck).

In the recently released "Bailout: an inside account of how Washington abandoned Main Street while rescuing Wall Street", Neil Barofsky, the former Special Inspector General in Charge of Oversight of TARP, details his efforts to constrain the Geithner Treasury from unconditional dispersal of hundreds of billions of TARP funds to the largest banks with no oversight. Former FDIC Chief Sheila Bair recently said of Geithner, "Tim seemed to view his job as protecting Citigroup from me, when he should have been worried about protecting the taxpayers from Citi." While Geithner did much to accelerate what the New York Times called a "no-strings windfall to bankers", the first $350 billion was dispersed under Paulson. Was he a hero who kept the world from falling over the "brink", or was he just rescuing his inept investment banker buddies and sending the tab to the taxpayer as some would contend? What evidence does On the Brink offer?
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114 of 150 people found the following review helpful By Jim Galt on February 1, 2010
Format: Hardcover
A book like this should be read only along with books like The Failure of Risk Management: Why It's Broken and How to Fix It or The Black Swan: The Impact of the Highly Improbable. These books are about the much broader topics of risk management and risk in finance, respectively, but they do put On the Brink in context.

Paulson has written a detailed, blow by blow, narrative account of several specific meetings leading up to and during the financial crisis. Less of the book deals with stepping outside of these meetings to analyze other specific causes, but there is some of that. The reader has to be careful of an attempt by Paulson to recast his own role in a more favorable light, but I haven't seen anything detailed enough to specifically contradict him, yet.

Paulson does mention an interesting and almost complete list of players in this crisis - Freddie, Fannie, Bernanke, Bush, etc. But he is almost silent on some of the more subtle players like the mathematical models that underestimated these risks (Taleb and Hubbard do and excellent job of this). He reiterates throughout the book that the events seemed "impossible" and yet they are events that seem to happen once or twice a century (Especially considering some of the relaxed regulation and oversight that preceeeded it).

He does mention the role of Credit Default Swaps in the crisis but not, say, the Gaussian Copula, Options, or Value at Risk. The use of such methods are at least partly to blame.

The reader has to assume Paulson's agenda of getting history to come out the way that casts him the way he would like to see it. But it is still an excellent account. We should like to see the accounts of Bernanke and Geithner someday and compare them side-by-side.
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87 of 114 people found the following review helpful By Dave C on January 24, 2011
Format: Hardcover
Like so many "over the shoulder" assessments of major historical events, Mr. Paulson's account is very self-serving.
He doesn't bother to address why - when the government had tremendous leverage in working out the bailout of AIG - it did next to nothing in holding banks like Goldman Sachs accountable for their poor decision-making. So AIG, propped up by American taxpayers, paid 100 cents on the dollar for the credit default swaps purchased by Goldman Sachs. These swaps in themselves were a suspect approach to managing risk. Moreover, the government never required the investment firms - whose senior management made atrocious gambles - to replace these inept executives (such as GS's Lloyd "We're doing God's work" Blankfein) although they didn't hesitate to take out the head of GM (Rick Wagoner)when we bailed out the auto industry.
So how to explain Mr. Paulson's role in all this and his self-justifying apologies for greed? Well here's an astonishing coincidence: he's the former CEO of Goldman Sachs. Surprise, surprise! And another tidbit about where Mr. Paulson acquired his ethical compass: he was a special assistant to John Ehrlichman in the Nixon White House.
I invite people to read this book, but I would advise against attaching any credibility to Mr. Paulson's view of the near collapse of our financial system.
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6 of 7 people found the following review helpful By Doubting Thomas on September 7, 2011
Format: Hardcover
Another "hey it's not REALLY our fault... really!" apologist for avarice, greed, and murdering orphans. Now he's writing a book for himself and the rest of the most destructive terrorists since 9-11. Arguably, they caused more fiscal damage (destroyed ~33 trillion USD in wealth since 2006) and if you count the additional suicides above the rate in 2005, 86,000 deaths. So they killed more people AND destroyed more wealth than the people who rammed two planes into the WTC, one into the Pentagon and one into a cornfield. We've been going after the wrong people this whole time... go figure.

When I read this book, it was similar to viewing the crisis through a polarizing lens. It blocked out all of the information along the axis that would make Goldman look bad, and skewed the information about the rest of the wall street morons who didn't know enough about math to realize that their models were hopelessly inadequate. If you want a real idea of why they're such fools, read "On Default Correlation: A Copula Function Approach", by David Xi. Then read the conclusion- HE SAYS CLEARLY THAT IT'S AN APPROXIMATE MODEL AND NOT AN EXACT MEASURE. It's based off of Gaussian electrostatics and magnetism, like all of Carl's other work. I guess the hedge fund managers who used David's function were too busy wallowing in their recently appropriated wealth to bother trying to understand the mechanics of what was actually making them money.
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