The structural issues around the EU are very difficult issues, says Former Treasury Secretary Henry Paulson. The important thing is to construct a big enough firewall so that we stabilize the banks and make sure they do not have a big systemic bank failure or messy member failure. When asked whether he believes another Lehman Bros. situation could happen in Europe, Paulson says the Lehman collapse is not the right analogy but Europe could learn from that lesson to avoid systemic failures in the future.
Highlights:
“There is similarity [with the financial crisis in the U.S.] in certain regards. This has been going on for a long time and I think it will take years to play out.”
“The most important thing is protecting the banks from a big failure that could drag down the whole banking system.”
“When you look at Lehman Brothers – I believe Lehman Brothers was a symptom as much as anything – I don’t think that is the right analogy. The one thing you should take away from Lehman Brothers is you don’t want a big, systemic institution to fail and you certainly don’t want that with a member state [in Europe].”
“The American people don’t like bailouts, no one likes bailouts but they’re certainly better than the alternative, which would be a catastrophe.”
On the US:
“Wall Street will get through this, Wall Street made a lot of mistakes… financial crises stem from flawed government policies. Always.”
“This was a huge credit crisis. Why did Americans borrow too much and save too little? There are flawed government policies. ”
“I think it’s going to be years before we get our unemployment down to an acceptable rate. It’s going to take a higher growth rate than we had to create a higher jobs number.”
“I’m not being an alarmist, I just think that until we deal with the huge structural issues that we have… we’re not going to get the kind of growth that we need.”
“The issue shouldn’t be what do we do with this rate or that rate, it should be what form of taxes… will give us economic growth? We need a new system and I’ve been for a system where we’d eliminate the deductions… and lower the rates and have something that will make us competitive.”
On China:
“Chinese are investors all around the world and they very much want to invest more. I think they’re looking to invest in Europe, they’re looking to invest in the U.S., they’re looking to invest everywhere.”
About the Chinese Government, “their job isn’t becoming any easier to continue to grow and meet the needs of the Chinese people.”
“I’m not a bear on China, but China has got some real challenges.”
“They need to speed up the process of reform. There’s actually more risk to them if they’re going too slow than if they’re going too fast.”
“I believe that you’re going to see ultimately more political freedom, more personal freedoms, because they will inevitably follow the economic freedom,” he added.
