Former Treasury Secretary Warns Of Looming Financial CRISIS
Published March 24th, 2014
In a new documentary produced by Bloomberg Businessweek and distributed exclusively by Netflix, Henry Paulson, former President George W. Bush's Treasury secretary recounts what happened during the financial crisis of 2008. In a classic "we must learn from history" stance, Paulson expresses concern about the current economic climate and claims that this concern, in part, motivated the production of the documentary.
In a Washington Times interview, Paulson wonders why Congress has not taken steps to reign in Fannie Mae and Freddie Mac, organizations that have only expanded in the years since the Troubled Asset Relief Program (TARP) bailout. Paulson claims that the market for private mortgages has nearly disappeared, making mortgages far too dependent on entities such as Fannie Mae, Freddie Mac, and the Federal Housing Authority (FHA). In order to avert a replay of the mortgage crisis, Paulson believes that no organization, government or private, should be considered "too big to fail."
One reason that reform has not occurred, postulates Paulson, is that the Fannie and Freddie have returned to profitability, and this profit has been crucial in providing funding for the Treasury, which continues to struggle with deficit budgets. But Paulson's concern goes beyond government entities. He also enumerates several private banks that have grown into the "too big to fail" category, but he praises the new regulations of Dodd-Frank that requires banks to have significant liquidity.
The documentary, "Hank: Five Years from the Brink," recounts the events of 2008 and Paulson's efforts in them. Paulson's handling of the crisis was extremely unpopular at the time, yet he believes that he took crucial steps to avert a national disaster and an unemployment rate around 25 percent. Even though Paulson is confident about his decisions, he confesses in the documentary that he was distressed to learn that TARP was even less popular with the American people than torture.
Bloomberg Businessweek editor, Josh Tyrangiel, first approached Paulson about the documentary about a year ago. Believing that anniversaries focus public attention on significant events, Tyrangiel saw the impending five-year anniversary of the Wall Street meltdown as an educational opportunity. Tyrangiel convinced Paulson to participate in the documentary in order to explain why he made the choices he made. Naturally, as a tool of the media, the documentary also seeks to explore the personal emotional battles that were involved as well and create drama by using archived news clips.
Paulson, originally reluctant to participate in the project, hopes that the documentary will renew interest in the events of 2008 and help motivate leaders to take action to prevent another crisis. Part of his concern is illuminated in the film when he acknowledges that some of his solutions may actually exacerbate the problem. For example, Paulson remains concerned about how banks consolidated into larger banks that are "too big to fail" and how government dominates the housing market. Nevertheless, Paulson remains hopeful that the nation will be a haven for private mortgages once again.