Paulson: Why I Changed My Mind
Everyone wants to know why Treasury Secretary Hank Paulson changed his mind on using the $700 billion government bailout/rescue money to make direct investments in businesses rather than buying troubled assets off their balance sheets, which is what he told Congress he was going to do.
Moments ago, CNBC's Erin Burnett got a chance to ask Paulson himself that question. Here's what he said:
"By the time the process with Congress was completed, it was clear we were facing a much more severe situation than we had envisioned early on. We had a limited pool of resources, and we asked how do we use that to get the maximum impact and get a powerful impact. And that's by putting capital in. This gives institutions the ability to...continue lending. [The money] goes further."
Paulson said it was not a problem with pricing the toxic assets -- trying to figure out how much to pay for them. "That was far from it," Paulson said.
"What changed?" Burnett asked.
"What changed was when we saw the commercial paper markets freeze up altogether. Good, mainstream corporations weren't able to raise money. Banks weren't willing to do business with each other," Paulson said.
Paulson said "the severity of the problem became increasingly clear to me."
He continued: "The Europeans kept saying, 'We have no problems.' Well, they didn't have a problem until they did. When you went from country to country around the world, this wasn't just about sub-prime [mortgages]. There was a global problem."
Shortly after, Paulson said he wasn't pointing fingers at any particular country.
"We in many ways humiliated ourselves as a nation," he said.
Paulson said the bailout is working so far.
"I think the system has stabilized," Paulson said. "I feel very comfortable with that."
Burnett created a wince-inducing moment when she quoted a Simon & Garfunkel lyric, telling Paulson that "a nation turns its lonely eyes to you." (From "Mrs. Robinson.")
-- Frank Ahrens
The Ticker is Twittering!
Posted by: kevinschmidt | November 14, 2008 3:48 PM | Report abuse
Posted by: misssymoto | November 14, 2008 4:12 PM | Report abuse
Posted by: sboulaisforfun | November 14, 2008 4:13 PM | Report abuse
Posted by: ex-Washingtonian_in_NH | November 14, 2008 4:54 PM | Report abuse
Posted by: mljsforgione | November 14, 2008 5:26 PM | Report abuse
Posted by: jralger | November 14, 2008 5:33 PM | Report abuse
Posted by: walker1 | November 14, 2008 5:34 PM | Report abuse
Posted by: peterroach | November 14, 2008 6:18 PM | Report abuse
Posted by: JohnAdams1 | November 14, 2008 6:39 PM | Report abuse
Posted by: economy101 | November 15, 2008 11:41 AM | Report abuse
The comments to this entry are closed.