Hank Paulson Looks Back With Pride

NEW YORK ( TheStreet) -- Former Treasury Secretary Henry Paulson has few regrets over actions taken by the U.S. government five years ago to forestall the credit crisis.

Speaking at the Economic Club of New York on Monday, Paulson said he was "convinced" that the U.S. government took appropriate actions during the crisis and that his decisions and those of other government officials would "stand the test of time."

Paulson had a very busy September 2008, as the Treasury, through the Federal Housing Finance Agency, took Fannie Mae ( FNMA) and Freddie Mac ( FMCC) under government conservatorship, where the two dominant U.S. mortgage finance companies remain. Another major event that month was the bankruptcy of Lehman Brothers, following Paulson's decision not to support any government backstop that might have facilitated a sale of the distressed investment bank.

Following congressional approval of the $700 Troubled Assets Relief Program, or TARP, Paulson in October 2008 met with executives of the nine largest U.S. bank holding companies to discuss the government's plan to take large capital positions in the big banks. Paulson "persuaded" some of the bank executives to accept TARP money, even though the executives didn't think their banks needed help. Banks receiving the first round of TARP investments included Bank of America ( BAC), JPMorgan Chase ( JPM), Citigroup ( C), Wells Fargo ( WFC), Morgan Stanley ( MS) and Goldman Sachs ( GS).

Paulson was CEO of Goldman Sachs before becoming Treasury Secretary in June 2006.

Paulson on Monday repeated his previous statement that he "didn't want to be the Treasury Secretary presiding over another Great Depression." He also said the bank bailout and related actions "were deeply distasteful to me," although they were "absolutely necessary." He also said he was "embarrassed" to take out the "so-called bazooka," possibly referring to his arm-twisting of some bank executives before they agreed to take TARP money.

When asked on Monday if he might wish to "take a Mulligan" for any of the actions he took during the financial crisis, Paulson said "I never was ever able to convince the American people that what I did wasn't for Wall Street."

Here's a summary of other comments Paulson made on Monday:

Paulson answered his own question of whether the U.S. might face another financial crisis, by saying "Yes." While acknowledging the progress being made by regulators and banks to cut industry risk, he listed three main "troubles" remaining. These include the reform of Fannie Mae and Freddie Mac, the "shadow banking market," and the lingering problem of banks that are "too big to fail."

"The phenomenon of 'too big to fail,' must end," he said, adding that the Dodd-Frank bank reform legislation and the Basel III capital standards together are "a good first step."

Paulson said he was "enormously" frustrated with Congress's inability to act immediately, but he learned how unusual it was for Congress to act so quickly, as it did when passing TARP.

He felt it was "fortunate" the credit crisis didn't happen at the start of a new administration and a new Congress. In September 2008, the Congress and the Bush administration had already been dealing with each other for several years.

Paulson also said the continuity between policies of the outgoing Bush administration and the incoming Obama administration for handling the credit crisis, was "extraordinary."

Looking ahead, Paulson said the most important question we must answer is "what are the best policies to promote sustainable economic growth?" When considering all the measures being taken to strengthen U.S. banks, he said "we want to make sure you're not just dealing with yesterday's war."

Paulson refused to state a preference for President Obama's coming nomination of the next Federal Reserve chair to take over from Ben Bernanke, but he did say the selection would be one of the "really biggest choices" Obama would make.

-- Written by Joe Deaux in New York and Philip van Doorn in Jupiter, Fla.

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