Henry M. Paulson left Goldman Sachs, where he was chairman and CEO for seven years, to become George W. Bush's third Treasury secretary in 2006. The first two, Paul O'Neill and John Snow, had been seen as wielding little power in Bush's war-focused cabinet, but history wouldn't allow that to happen in Paulson's case. A year after he took office the subprime mortgage crisis began, and the following year its effects threatened to take down the entire world financial structure. Paulson, along with Ben Bernanke and Timothy Geithner at the Federal Reserve, managed the government's response to the crisis, culminating in Congress's approval of the $700 billion TARP plan in the fall of 2008. Ever since, all three men have faced both praise and anger, for letting some firms fail and for saving others, for intervening in the crisis or not intervening enough. Bernanke and Geithner are still at the helm of the economy, as Fed chairman and current Treasury secretary, but Paulson left office a year ago with George W. Bush and has spent much of the time since writing his first book, On the Brink, an insider's account of the crisis.
On the Brink is Paulson's chance to give his side of what happened during those tense months, and he tells a compelling story, in which he, Bernanke, and Geithner worked to convince financiers, regulators, and politicians of the urgency of the crisis, and then found that it was snowballing even beyond their fears. Decisions were made on the fly, often without precedent, as they struggled to arrange the regulatory authority to do what they thought necessary--all during the peak of an already-dramatic presidential election. Paulson puts you inside the New York Fed when dozens of financiers hunkered down through the night to work how to save Lehman Brothers (and save their own firms if Lehman failed), and the famous and preposterous White House meeting in which senators and candidates John McCain and Barack Obama faced off over the TARP proposal then before Congress (and after which Paulson got down on one knee before Nancy Pelosi to plead for his proposal). There's a great deal of anger at the government and Wall Street, both of which Paulson represents for many people, for the way the crisis was handled and for the neglect and excesses that caused it, but On the Brink makes a vivid case for the necessity of what Paulson and his colleagues did, flawed as he admits some of their decisions might have been.
We had the chance to talk to Paulson a few days before the book was released, and you can listen to our podcast interview (in two parts) below, or read the full transcript after the jump:
Amazon.com: You accepted the job as Treasury secretary in 2006, with some reluctance. Did you have any idea what you were getting into?
Paulson: I had a pretty clear idea that there would be a credit crisis sometime when I was in Washington. And I told the president I thought there'd be one, and the first major meeting I had with him I spent just talking about that topic. But I did not anticipate a crisis of the magnitude we faced--didn't anticipate that at all--and I certainly was bordering on naive in my understanding of the regulatory powers and authorities in Washington.