Paulson Discusses Financial Crisis, U.S.-China Relations

Former U.S. Treasury Secretary Henry M. "Hank" Paulson Jr. spoke at the Institute of Politics Wednesday evening, citing poor communication during the 2008 economic crisis as one of his failures during his tenure in Washington.

Paulson, who served under former President George W. Bush from 2006 to 2009 and as the chairman and CEO of Goldman Sachs from 1999 to 2006, also discussed topics such as U.S.-China relations and climate change policy at the John F. Kennedy Jr. Forum.

The discussion, which was moderated by Harvard Business Review editor-in-chief Adi Ignatius, focused on a reflection of Paulson’s actions as treasury secretary during the financial crisis.

“Most of the things that I look back on today were communications failures. It is very hard to communicate and to, on one hand, try and explain to people what is happening without scaring them or making it worse,” Paulson said. “When I left Washington, I saw one poll that had 90 percent of the people against the [Troubled Asset Relief Program], and I saw another poll and 60 percent of the people were against torture.”

Paulson also said that another failure was the lack of major reforms to government-sponsored enterprises Fannie Mae and Freddie Mac. Shane M. Sideris, an asset management analyst who attended the talk, agreed and said that this issue is the most relevant aspect of Paulson’s legacy.

“Six years later and [the Fannie Mae and Freddie Mac problem] is still not resolved,” Sideris said.

Paulson also emphasized the importance of strengthening the relationship between the U.S and China.

“This is by far the most important bilateral relationship we have,” said Paulson, who now serves as chairman of the Paulson Institute at the University of Chicago, a think tank that seeks to advance global environmental protection and sustainable economic growth in the United States and China.

Paulson said that in order to solve major economic, environmental, and climate problems on the global level, the U.S. has to compete and cooperate with China.

“We have to look at the areas where we have a strong mutual interest, a shared interest, and turn it into concrete actions. We have to build trust and not let the differences preclude our working together,” he said.

Former Massachusetts Congressman Barney Frank ’61-’62, one of Paulson’s closest colleagues in Washington during the financial crisis, praised Paulson’s leadership abilities and his effectiveness during the crisis but said he was critical of Paulson’s stance and policies on China.

“I differ with [Paulson] some in that I think he is a little soft on the Chinese,” said Frank, who currently serves as an adjunct lecturer in public policy at the Kennedy School of Government. “He kind of excuses their anti-democratic practices more than I would like.”

A third part of Paulson’s speech dealt with climate change, which he said is the “worst imaginable problem” and one that can only be solved if both China and the U.S. work together.

Paulson said that the lack of willingness from businesses to treat climate change as an economic risk and the lack of pressure from the government to take action due to the long-term nature of the issue will lead to problems down the road.

“The only way you get change is if the people demand it,” Paulson said. “Young people are the hope.”