Former Treasury Secretary Paulson Visits Cornell
Defends Decisive Actions in Wake of Financial Crisis
Former Secretary of the Treasury Henry Paulson delivered his take on the financial crisis of 2008 in a public interview with Cornell University President David Skorton yesterday at Cornell’s Bailey Hall.
In the discussion with Skorton, which was followed by a question and answer period, Paulson continually stressed that while the decisions he made as Treasury Secretary may have been unpopular with the American people, those choices ultimately saved the financial system from total collapse. Paulson jokingly remarked of the Troubled Asset Relief Program or TARP that “93% of the American people opposed TARP but only 60% opposed torture.”
Describing the authorization he would need from the President to fix the ailing system, he equally glibly deadpanned that “I couldn’t ask for unlimited, so I asked for unspecified.”
Paulson recounted that in his first meeting with President George W. Bush after taking the office of the Treasury Secretary, Paulson told the President “We are overdue for a credit crisis,” but that he didn’t know what its source would be.
While Paulson’s warning about the impending crisis was correct, he conceded that neither he nor anybody else knew that the housing market would cause the crisis and Paulson frankly stated that, “Even if I had been omniscient, there isn’t a single thing I could have done about it.”
In other musings about the economy and its future, Paulson expressed grave concerns that the Social Security system will fail to sustain the current workforce expected to retire in about 20 years.
Additionally, Paulson fears that the financial system’s complexity will continue to plague it. Chief among his concerns, Paulson cited that the ten largest financial institutions control 60% of the country’s assets. Paulson believes that these institutions are less too big to fail than they are too big to be quickly liquidated in the event of a crisis. He called for these institutions, including Goldman Sachs, where he was CEO from 1998 until 2006, to write “living wills,” or explicitly stated liquidation plans.
Since leaving office, Paulson has published On the Brink: Inside the Race to Stop the Collapse of the Global Financial System. He appeared at Cornell yesterday in the 29th Hatfield Address, a yearly event in which the University invites distinguished business leaders to campus to speak to both students and the community at large.