Hank Paulson on Lehman Brothers, Government Failures and Dry Heaving
Hank Paulson is a lot more popular now than he was a half-decade ago. The former Treasury head who was the key figure in the government bailouts of Wall Street is commemorating the five-year anniversary of the beginning of the financial crisis – the explosive failure of Lehman Brothers – with a media tour that has taken him from print to television and even a Netflix documentary that will air next week.
Paulson has so far made a number of interesting statements. Here are the most illuminating:
- He doesn’t regret the bailouts, but does still lose sleep over how he communicated the importance of rescuing financial institutions to the American public. “Let’s not forget…that money came back plus $32 billion,” he told The Today Show.
- Financial crises are an inevitability. The root causes of all of them are flawed government policies.
- In all his dealings with banks and Congress, Paulson forgot to call one very important person: his brother Dick, a fixed-income salesperson at Lehman’s Chicago office. “I called, and he immediately started asking about me,” Paulson noted in a Bloomberg op-ed. “He wasn’t asking about what was happening to his stock or his retirement. He focused on me.” Talk about a brutal phone call.
- Paulson believes another financial crisis is still very possible, for three main reasons. One, the mortgage industry – through Fannie Mae and Freddie Mac – is essentially nationalized. Ninety percent of mortgage loans have government guarantees. Two, shadow banking is still rather prevalent. More transparency is needed. Three, there are way too many financial regulators who are essentially competing against each other. “This is a big problem.”
- President Obama has not asked Paulson for advice on who should become the next Fed chair. “If he wants my advice, he’ll ask me,” Paulson said, without giving any hints about who he’s supporting.
- Paulson has a strange dry heaving habit that kicks in when he is exhausted. “It sounds like I’m really sick, because I make a lot of noise. Rahm Emanuel came by. Harry Reid offered to get a doctor. I said I didn’t need it.” Weird.
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