November 11, 2010

Henry Paulson Says Crash Was Impossible to Stop

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Former U.S. Treasury Secretary Henry Paulson defended his handling of the 2008 financial crash and critiqued the country’s preparedness for another economic crisis in a forum at Bailey Hall Thursday afternoon.

Paulson, a key member of the Bush administration and former C.E.O. of Goldman Sachs, admitted that while he had entered the White House fearing an imminent credit crisis, the scope of the crash caught him unawares.

“The thing that we all missed was that you could have [this] kind of decline in housing prices,” he said, noting that the large number of individuals buying houses turned out to be “too much of a good thing,” since so many were defaulting on their mortgages.

However, Paulson said that even if he had known the crisis was coming, he would have been unable to prevent it, citing a complex set of problems that his office could not have solved alone.

“If I had been omniscient, there still would have been nothing I could do,” he added, arguing that the creation of “living wills,” or contingency plans, for banks would have mitigated the collapse.

“In our system, it seems to take a big crisis to get something done,” Paulson said

Paulson also sought to emphasize his cooperation with Democratic lawmakers to deal with the financial crisis, describing close relationships with Rep. Barney Frank (D-Mass.) and Speaker of the House Nancy Pelosi (D-Calif.).

“Partisanship is the enemy of all of us,” he stated, and lauded all policymakers who voted for the Troubled Asset Relief Program (TARP) bailout as making an unpopular decision that was ultimately in the country’s best interest. Paulson argued that without TARP, the financial crisis would have been far worse.

“You never get credit for avoiding a disaster that didn’t happen,” he noted.

Paulson went on to criticize the American financial mindset that he said favors excessive spending over saving and seeks to blame other nations rather than fix its own problems.

He also lambasted those who see China as an “enemy” that floods American markets with cheap goods. Paulson argued that products from China are actually beneficial, since they provide low-income shoppers with more options.

Paulson also expressed concern about the sustainability of the U.S. retirement system, calling Social Security and Medicare a “house of cards” and advocating for overhaul of the system as soon as possible.

While he acknowledged that many of his predictions for American economy were rather gloomy, Paulson nevertheless said he was hopeful that the next generation of Americans would find innovative solutions to future financial challenges.

“Anyone graduating in the next few years — what an interesting time to come into the world,” he stated.

Despite Paulson’s reassurances, many students in the audience, like Ben Koffel grad, who is also a Sun columnist, emerged with a sense of uneasiness about the future.

“I thought [the speech] was both interesting and depressing, especially to find out that change hinges on a government bureaucracy,” Koffel said.

Derek Siker ’11 said he wished that Paulson had been more direct during the question-and-answer portion of the presentation.

“Wow, [he] dodged those questions like a ninja,” Siker said. “Everyone was so busy getting over the celebrity factor of his appearance that they didn’t realize he was giving shallow answers to deeper questions.”

Original Author: Eliza LaJoie