TODAY   |  September 12, 2013

Henry Paulson: Bank bailout was necessary

Former Treasury Secretary Henry Paulson tells Matt Lauer that even five years after the financial crisis, he still believes that bailing out banks like Lehman brothers was a good decision, even though many believed his focus was on Wall Street instead of Main Street.

Share This:

This content comes from Closed Captioning that was broadcast along with this program.

>> it was five years ago this week that the investment bank ehman brothers filed for bankruptcy, in an event that triggered what would become the worst financial crisis since the depression. the dow lost half its value and unemployment would eventually reach 10%. former treasury secretary henry paulsen reflects on the latest meltdown in bloomberg business week and five years from the brink. secretary paulsen, it's good to see you. good morning.

>> it's good to be here.

>> so much has been written about those dark days surrounding preceding 2008 and the days after. when you went back to look back at them. to talk about this for the magazine and the documentary. did it bring back the pit in the stomach that you must have felt at that time?

>> more than a given. it was the night before we filmed the droumt and my stomach tightened up.

>> you know, it was a little bit. somebody used the analogy with me as this was all unfolding it was like being on an airplane that was on fire, it was going down and you had to get out on the wing of that plane while it was going down and fix it. you did a lot of things that were unprecedented. you bailed out aig. tarp came about doctor$700. when you look back, any decisions you made?

>> the major decisions we got right. i have second thoughts about a lot of things. the biggest ings thing i have second thoughts about i never was able to explain to the american people that every action we took was for them to keep our economy functioning. because if we hadn't had a functioning economy, the situation could have been quite worse. i wasn't able to make. let's remember, because you didn't make that case sometimes clearly, you got a lot of criticism. people said, the guy helped out the people on wall street at the expense of main street .

>> right.

>> one of the things you talk about for the first time is the impact that this actually had on your family.

>> yeah. it was not just my family. i guess you are alluding to my brother.

>> your brother, right.

>> people really all over the years have said when i talk about a debt in the documentary was after lehman had gone down that week, there was a lot going on. we were dealing with multiple crises and it was lehman had gone down sunday night and it was friday morning when i came up for air after having met with congress and asked for the extraordinary powers. i remember i had to give my brother a car. he was a very good friend. my best friend . he was a fixed income salesman, senior vice president in the office of the lehman brothers . so i called him, i was calling to explain we had done everything we possibly could. we didn't have the tools to save lehman . before i got there he said to me, i know, his concern was about me. and i recognized that there were people all over the u.s. that were talking to loved ones and also --

>> in that same situation. people hated tarp because they thought, you know what, ill i it bails out these banks that makes horrible decisionings, these bankers took home huge bo fusses while they were making horrible decisions. you think it was absolutely necessary?

>> oh, gosh, yes.

>> have they learned their lesson?

>> i would say this about tarp. what tarp did overnight it put capital into hundreds of banks.

>> have those banks learned their lesson?

>> and money came back plus $32 billion. i think banks made mistakes. they've come a long way. the banks are better capitalize, better regulated. have much, much better risk controls. but the thing i say which still isn't popular, i'm not defending the banks. because they made decisions. but the root cause of every crisis is wise in flawed government policy, because no matter how the financial system is set up. no matter what the economic system is, as long as you have people who are going to have financial crises , you are going to have bubbles that manifest themselves in the financial system . so the key thing is to make sure you've got the tools you need and the political will to ask the force to command the crisis before it becomes too big.

>> it's a fascinating look back. it made me nervous reading about it. i can only imagine what it did to you. secretary paulson, good to see you.