Former Treasury chief Henry Paulson and billionaire Warren Buffett said US taxpayers would recover every cent paid out to banks during the economic meltdown and may even turn a profit.
The Democrat investor and the Treasury secretary under former US president George W. Bush spoke onstage on Tuesday before 2,400 at the Greater Omaha Chamber of Commerce’s annual meeting.
In his recently released book, Paulson defended the government, which scrambled to prevent failing US banks from dragging down the global economy with them.
“As bad as this is, when we look back it’s not as bad as it could have been,” Paulson said.
And he said the US was better off today than most countries.
“Every other major economy has many more significant challenges than we do,” Paulson said.
But he said several significant challenges remain.
Paulson said he thinks compensation is normally out of whack on Wall Street, but now in the wake of all the government bailouts, many executive pay packages are excessive.
“I think today restraint is very much in order for the top people,” Paulson said.
Paulson’s 500-page book, On the Brink: Inside the Race to Stop the Collapse of the Global Financial System, offers a chronological account of the rush to prevent an economic disaster as Lehman Brothers and American International Group spun toward collapse in September 2008. Paulson served as treasury secretary from June 2006 to January last year.
Paulson and many other regulators have been faulted for letting Lehman Brothers go bankrupt on Sept. 15, 2008, a signal event in the global financial crisis and still by far the largest bankruptcy in US history.
Yet Paulson, a former Goldman Sachs Group Inc chief executive, called the credit crisis of 2008 “a doozy,” one whose scope he never foresaw.
He praised the still-controversial agreement by former Bank of America Corp chief executive Kenneth Lewis to buy Merrill Lynch & Co, an accord announced roughly an hour before Lehman went bankrupt.
That move still dogs Lewis, who retired from the bank six weeks ago and was hit with a civil fraud lawsuit last week by New York Attorney General Andrew Cuomo over his conduct in the merger. Lewis’ lawyers have rejected the charges.
Merrill “wouldn’t have lasted a week” had Bank of America not bought it, Paulson said.
Lewis “was a confident, decisive CEO” and buying Merrill was “a stabilizing action” for the financial system, he said.
Long supportive of Democratic causes, Buffett said Paulson’s book gave him a better understanding of how Bush and Paulson handled the financial crisis.
“I really did gain an appreciation for the fact that he understood what was going on and that he understood what needed to be done,” Buffett said, referring to Bush.
He recalled Bush’s pithy summary of the crisis in late September 2008, in which the president was quoted as saying: “If money isn’t loosened up, this sucker could go down.”
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