Former Treasury Secretary Henry Paulson defended his decision to bail out US financial institutions in 2008, but acknowledged that he erred in communicating the move to the public.
Speaking to several thousand US and global executives at the Biotechnology Industry Organization’s annual convention in Boston, Paulson said he should have made it clear that the bailout was intended to stabilize the financial system and prevent a collapse that would have hurt ordinary Americans.
“What I never was able to make the public understand was that the rescues weren’t for the banks, they were for the public,” Paulson said. “Every rescue, every bailout we did, I have no regrets because it was better than the alternative.... The money we put out, it prevented a collapse.”
Paulson appeared on a podium for a post-luncheon conversation with another former treasury secretary Robert Rubin, who led US bailout efforts aimed at propping up the Mexican and Asian economies during the Clinton Administration. Both said decisive political action is needed in Europe and the United States soon to prevent a new financial meltdown.
Rubin said the United States, the European Union, and Japan all face unsustainable levels of debt.
“All three of these, roughly speaking, have the same problems,” he said. “They have unsound, unsustainable, and deeply dangerous fiscal situations. In each of these major regions, the problem has been kicked down the road rather than addressed.”
The debt crisis in Europe, in particular, has the potential to drag down the US economy, the former treasury secretaries warned.
“I’m not optimistic in the short term on Europe,” said Paulson. “One of the problems we have in Western democracies is voters wanting things they don’t want to pay for.”
Addressing the strains in the US economy, he said, “The likely case is, although Europe is a drag, the US economy will continue to muddle along, but at a pace that doesn’t make a dent in unemployment.”