>> former treasury secretary henry paulson talks about his new memoir, "on the brink" with berkshire hathaway ceo warren buffett. in the book secretary paulson discusses the actions he took in response to the 2008 economic collapse. this event was part of the greater omaha chamber of commerce's 2010 annual meeting. >> hank, first of all i want to thank you for coming to honor us. i should declare right off the bat that i'm a friend of hank's, have been so for some years. i admired him before he took the job. i admire him a lot more after the job he has done as secretary of the treasury. the name of this book is "on the brink," and that's exactly where we were in september and october of 2008. at that time, our economy, our

financial world went into cardiac arrest. and we had four people in the operating room that we were very fortunate as a country to have in place. we had hank. we have ben bernanke. we have tim geithner, and we had sheila bair, the head of the fdic. and i know a lot people in finance. i know a lot of people in business. i know a lot of people in government. and i can't think of four that would have done a better job of getting us through that. now it's kind of fashionable now to look back and pick out one little aspect or another of what was happening then, but our country's financial system froze up during that period. some of you in this room were at a party i was at in september of 2008 when the talk was, are our

money market funds safe? now, when you have 3.5 or more trillion of funds held by 30 million people, who on a sunday night are worrying about whether they can get their money, that money was half of all the deposits held by u.s. banks at the time. you have a panic. you had commercial paper freeze up entirely, and you had some of the biggest companies in the united states, and some of them are described in this book, to worry about whether they're going to meet their payrolls in a short bit of time. you had the sixth largest bank in the country as term as domestic deposits, washington mutual fell over the weekend that you had walk obeah that need a shotgun marriage on monday morning to survive. most interestingly, this book starts in early september, when freddie mac and fannie mae essentially were broken.

here are two institutions that guaranteed 40% or so of all the residential mortgages in the united states. whose death was held all over the world in very significant amounts, including foreign governments that would not have taken kindly to a default of freddie or for any. you have them holding a very large portfolio of mortgages themselves. and like i say, in our septemb september, they both were broken. it's worth noting for those who take shots at some of the people who are operating during september and october, that those two institutions, freddie and fannie, were chartered by congress and were ruled by congress. and for those who of her them, criticize the leverage in the banking system, it should be also noted that they allowed freddie and ferry to operate with 40 to one leverage ratio and they let them guarantee over

100 times the amount of capital they had in mortgage guarantees. so these two institutions, which were vital to the mortgage market, where vital to the very integrity of the united states, and which had received in this complicated hanks problem, and a very short period before september the watchdog agency that congress had established to watch these two agencies had given him a clean bill of health. and that clean bill of health might be fun to go back and read that now. well, let's get onto hank's book, and you know, when i got this book, i got it a little early, and i expected to learn about the financial crisis than i did. but i didn't realize that i would also learn something about how to attract women. [laughter] >> it's a little late, i realize, but hank had a

surefire, surefire approach, which when he took windy out on their first date in boston, i would like to describe, if you want to elaborate i want to hear about it. >> let me say before do that, one, i do lots i am delighted to be here in omaha. this is just like washington. and again, i've been a longtime friend and admirer of warren and he was just a real pillar of strength, a source of strength for me during the credit crisis. now warren was referring to something in the book. i was not a model of maturity when i was a senior at dartmouth college. my first day with wendy, we were at the boston pops, and she wasn't very impressed when i made my program into a paper plate and sailed it.

[laughter] >> did you hit him? >> no. but she gave me another chance. >> did she go home early that night? >> yeah, yeah. yes, she went home early that night. >> and fortunately he got a second chance. hank, tell us a little bit about -- you know, hanks is in the book, i'm a tough guy. i forget what point he said that. but he was a wrestler in high school. when the president asked him to become secretary of the treasury, and hank's initial action was not to do but he decided to do. he had one big worry, and i think this crowd might be interested in what makes a grown man tremble. >> trantwo's talking about my mom. and i'm quite close to my mother. she is a strong woman. she is very engaged and interested in politics and

policy, and she was not and admirer of george bush. and very unhappy with the war, they're interested in women's issues and so on. so there'd been a fair amount of speculation in the press that i might go to washington. and i turned down the opportunity a couple of times, and i had assured her that i was not going to go. because i had no intent of going. but then when i reversed myself and decided very suddenly it was the right thing to do, not to say no to my country, i was in illinois where we live, and still have our primary residence. and i was there on the moral day weekend, because the president was going to make the announcement on the tuesday after memorial day weekend, so i was going to see my mom. unfortunately, in church, we are at church together by a longtime friend asked me about what i was doing next, and i told her. of course, she went up to my mom and said, isn't this great?

and bob didn't think it was great. so when i arrived, up to tell my mom, she had already known about it, and i didn't see her sob at much. but she was sobbing and very angry. angry and crying. and said to me that i started with nixon and i was going to end up with bush, and i deserve everything i got. [laughter] >> and that i was jumping out of a sinking ship. and i will say this though, in the and i say by the time i finish in washington, my mother had a different president, a different opinion of george w. bush, but it is not a good way to start all. and wendy was a much happier with the. >> one of the most interesting things i found in the book, and i've not heard a word about this before, was your account of how some top russian officials had

gone to some top chinese officials with the suggestiosuggestion, essentially, that they start dumping the bonds of probably freddie and fannie at that time. that almost sounds like a bear rate. i thought that was a sort of thing that just the evil guys and wall street did. but tell me about that. >> it never happened. but for very, very concerned about stabilizing fannie and freddie. because as one said there is $5.4 trillion of securities that were either injured or issued directly by these institutions. they were highly level institutions coming and the securities were held i think about and 1.7 touring outside of the u.s., the biggest portion was inside the u.s. and we had gone -- i've been trying to get reform legislation from congress the beginning of

2006, and to get the kinds of reforms we needed. but we were unable to get action until they were just on the edge. and so we were able to go to congress, get the authorities. and then what we needed to really spend time poring over their books, understanding the financial situation. well, i had -- in the book, i break out that i was in china for the olympics, and there it was given to understand that the chinese had been approached by the russians with a suggestion that maybe they could sell the securities together, maybe to test our resolve, who knows, who knows why? >> why do you think? >> i would say probably -- i don't know why. but we had so many conversations

with the russians, the chinese and everyone else, i just knew that just any kind of sudden selling would have really spooked the markets. and i would say it never happened. but it was, you do, when some people say to me just about everything bad that could've happened did happen, i say not quite. it felt that way sometimes, but you know, i worried about another possibility of a sudden decline of the dollar or other things that never happened. one of the biggest concerns i had was getting fannie and freddie stabilized. and any sense we tell the story of how very suddenly we put them into conservatorship, which was essentially guaranteeing their debt, because it was in essence

an implicit obligation by the united states of america. it was sort of like the banks had theirs is an conduit which were off-balance-sheet, and will with implicit guarantees that that was a little bit like fannie and freddie were. and we were a racing against time for stabilizing those before we knew some batteries were going to be coming out in the banking sector, and particularly lehman brother losses. so that was a race against time, and i was fortunate, we were fortunate we are able to get that without the markets becoming spooked or unsettle. so that's why, you know, when i heard in china got my full attention. >> there's a front page story in the journal this morning about freddie invading, and it's very much in worth reading. and i believe it said there are now 111 billion that's been put in by the federal government, but it is expected that much more will. so in effect, it presently looks

like the federal government will lose more money in freddie and fannie than by aig by some margin. >> when i look at these programs overall, okay, we will get every penny we put into the banks back and with a profit. >> i think you're right. >> when you look at all the other programs, we may be surprised at what we get back. and actually, freddie and fannie i'm thinking the fed will make a lot of money, by buying into what those security. but you're right in terms of the losses. and today to me, the important thing about freddie and fannie is right now the u.s. needs them playing the role they're playing. but one of the things that got us into this problem is not just feand freddie indiana, the weigt of over programs to stimulate housing, and it just has gone

too far. and freddie and fannie are not going to be able to stay in their present form. they need to be -- i think their mission needs to be shrunk. they need to be restructured and very, very fundamental ways. but right now we need them where they are. but i think how we need -- how we unwind this situation is going to be very important. >> your user getting grilled by congress and they would point out how there was too much leverage in the banking system. did you ever get tempted to say that the institution that they ran had the most leverage at all? >> i get tempted to say a lot of things, warren. [laughter] >> but i resisted that temptation, because one of the things that i am pleased about that i was able to building up relationships on both sides of the aisle, and congress did act

before the system collapse. and if it had caught, we would have easily had 25% unemployed in this country. it would've been a terrible situation, and the crisis of -- the book is to a large extent the story between market forces and political forces. and the crisis came in many ways at the worst time with an election on the horizon. and so what i needed to do was to get action from congress. and actually what we got out of freddie and fannie, which was unlimited authority. i use the word specified. it sounded better. whatever. but we need those. but i had to keep reminding people that i didn't design this thing and didn't create it. >> hank, you have relations with the chinese long before this, and used it as a good effect

when the crisis. i think you told me that china may be 70 times or so. will be the american public's greatest misconception about the chinese and their economic system? >> well, i do believe there is a lot of this conceptions that the americans have, even about our own economic system. [laughter] >> but i think the thing that we all need to keep in mind is we are operating in a global economy. and so when other important economies don't do well, it hurts us. just like when we don't do well, it hurts others. and so the worst thing that could happen to us, and could've happened to us during the crisis, would be to of had the chinese economy falter and stop growing. and looking ahead, we need china

to keep doing well. it's in our best interest to have been keep doing well. now there are plenty of differences, and there are differences in the economic area and in other areas, but i think that the most important thing for americans to understand is that there is a relationship where we are both, to a large extent, dependent upon the other. we of course in the u.s., we don't save enough. can you hear me okay? so in the u.s., we don't save enough. we have a tendency to save too little as a people and as a nation. we borrow too much. and so we, you know, chinese savings and capital are very important to our capital markets. now the chinese save too much.

and they need to continue to open up their economy, and continue to open it up to competition, to move forward with the reform process, to reform their currency, to move more quickly to a market-driven currency, all those things. and so there's a very important difference, but we just need to remember that this is the relationship we need to get what and when he to work very hard to get it right. >> and when you were telling that and much more gentle terms from time to time, what sort of response did you get when you talk to them about saving more and so on? >> or spending more. >> i would just simply say that one of the things we started under george bush was the strategic economic dialogue, which is being carried on. and what i gently said, see, we agreed in principle.

so they agreed to open up, they need to open up their economy to competition, needed to continue to move their currency, to a greater extent determined by the market. but we agreed in principle and in philosophy, but it was a matter of speed. and so i would be thinking we needed to move it this far, and this. time. and they will take they need to move it this far in this period of time. but we talked very directly about it here and i think the thing that you need to remember is that anti-with the chinese or any other sovereign nation, we need to put it in terms of what it means to china and their people. and i was just totally convinced that, to the extent they sped up the process of reform, it was

only going to benefit them and help them get where they want to get over the longer-term. and i would say to them, i believe in free trade and open markets, but you know, making each of for me to fight to keep our markets open. if you speed up the process of opening up your markets. but i felt we got very good results. if you look at the history and you look at what happened to the currency, when i had a dialogue with the chinese, i think the record will show that it moved. that we -- i was very proud of this 10 year framework on energy and the environment. because again, we are not going to solve the issues of climate, and environmental issues we have and energy issues, and lets you the two biggest among the two biggest importers of oil and the

two biggest emitters of carbon to work together. and there is a lot we can do working together between our two countries. and again, i am a big believer in engagement. because there is very little you can do in this world that's important globally that is done on a unilateral basis. >> you mentioned president bush. you know, i'm a little bit like your mother. in fact, i want to get to meet her now. [laughter] >> remember, she has changed her mind. [laughter] >> when i get to her maybe she will change back. [laughter] >> but i did through the book, you know, i get more appreciation for what he did in this particular situation. in fact, you know, i have read various economists eloquent ones, adam smith or david

ricardo. but i really have never heard a more eloquent statement that systemically summed up the economic world that george bush made in september i think of 2008, when he said in the memorable 10 words, he said if money doesn't loosen up, this sucker can go down. [laughter] >> tell us -- i mean, you know, it was like the gettysburg address. short go to the point. [laughter] >> as i read the book, i got an appreciation for the fact he understood what was going on and he understood what needed to be done. was there ever a time you went to them with proposals that he shot you down on? >> no. because he was -- he wasn't -- he was only surprised when i was surprised. and i was surprised more than once. >> what was the biggest surprise?

>> but i would say that i spoke to him, one of the things i learned from my previous career is no matter what you negotiate, i can have all kinds of understandings about the relationship we would have, but if i did have the right relationship with the president, it wasn't going to be his fault it was going to be my fault. so i had a year before the crisis to get to know the president, to work with them. and remember, he went to business school. he understands, he had a good fundamental understanding of markets. and economic issues that he cared about them, and so the conflict he dealt with was the same conflict i dealt with or anybody. we believe in the united states of america that risktakers should bear the responsibility of their own losses. and so that big interventions were not something -- i did go

to washington do that, and he certainly didn't. but from day one, he understood that the financial markets were about our economy and jobs. so repeatedly, i would be coming to him, and i wouldn't have to sell him, halfway through the conversation, he would buck me up and say listen, hey, we will get through this. we're not always going to look good. this is going to be a politically unpopular. but we're not going to let our economy go down. we will do what it takes to save jobs, to say the economy. and that was his point of view. and he was, you know, you talk about my mother. sometimes he was almost like my mother to me that he would be telling me i need to work out and need to get more sleep. [laughter] >> in terms of the other people on the political stage, it seemed that going up to the election, that you probably felt

that barack obama was more knowledgeable and more interested in what was going on in the financial crisis than john mccain. is that a fair assessment? >> let's say it's no doubt fare that i had the conversations i had with john mccain, which were as frequent as they were with barack obama, as it were more difficult, and i certainly -- he certainly gave me more anxiety. about all of that. and you know, now president obama was attentive, engaged, and i felt comfortable he was going to support what we needed to do. but i am quite grateful to john mccain, because -- and have real respect for him, because let me tell you.

an election six weeks away when we went to congress, and there's no way that we would have, in my judgment, god part if john mccain had come out against it. and if he had played the populace part, we would have been left defenseless. and so as i look back, i am increasingly grateful of the way he handled himself during this period. but during the time he gave -- you know, i lost a few hours of sleep. >> you discredit one place in the, you have something where you say you issued a veiled threat and i read what you said. >> well, that was when he was, when he came back. you know, there was quite a scene when he interrupted the campaign to come back. and our member i was testifying at the time, and michelle davis

who is here with me today, and was sitting behind me and i was testifying and handed me a note. my blood soda brand gold right there. and she said to me now, if someone asks you, about john mccain coming back, just simply say i welcome the involvement of, unit, of everyone, and so on because i think she was afraid what might come out of my mouth. [laughter] >> do jihad in the notes before you came up your? >> no, she talked me into flying on the way down. but as it turned out, again, it was a couple days of anxiety but again, john mccain, when he was back, spend time with the house republicans rallying them,

and you know, it was -- he did his part, and then after we got the t.a.r.p., he did not jump on or criticize some of the things we had done, which again were very unpopular. you know, american people were -- on one level the american people like bailout, and so again it was -- i look at a poll once, at sometime after the election, but after we're done some of the things we've done, and i think -- this may be a slightly exaggerated, but i recall it was something like 93 percent of the american people oppose the bailout, and 60% opposed torture. [laughter] >> 70%, 70% were worried that we would go into something much worse than a bad recession. and so we never have been able

to split the american people this was a for wall street, this was for them. >> hank, you had these consultations with obama, although i understand this sort of ended after the election. -- >> leave out the sort of part. yes. [laughter] >> both the president and members of the administration repeatedly said during the past year that they really didn't anticipate how tough things would be in the economy, but from the message you are giving them, i mean, you expect things on the stuff, or am i wrong on that? >> warren, i asked which are expected, because i did not expect them the stuff. i expected them, i knew when we went out there, a scene in the book where we talk about ben

bernanke and chris cox and i went up to september 18 to meet with congress and tell them we're going to need, and the difficulty we had as warren said much better than i could, the arteries of the financial system were freezing up. and so i knew with a certainty that business was going to turn down, because when you have companies that it is uncertain whether they will be open to raise the short-term funding, most cfos will go to the ceos as a boss, i may not be able to have all the funding you would like for the next 30 days, so what it does a prudent company do? they start cutting back. but congress hadn't seen this yet. and so they hadn't seen it yet in their district, so i knew with a certainty it was going to get worse. i'm not sure i knew it was going to be 10% unemployment, but i

knew it was going to be bad. and so then when -- and i knew if they didn't do something and it collapsed, then businesses will be able to fund themselves, when be able to pay for the inventories and pay suppliers and would let employees go and i would ripple through the economy, and would have armageddon. so then, when the economy did turn down, we have this terrible situation of, as congress on, because congress ought as the american people had seen it. we went up and said, give us these authorities and if you don't, we are going be in deep do do. you know, it's going to be bad. well, they gave us the authorities and we were in deep do do. and as barney frank, it's very hard to get credit for presenting, preventing a

disaster that people never saw or could see. >> did you get down on your knees and plead to nancy pelosi? >> i did. but you have to understand that i was in a cabinet real witnessing when both, you know, senator mccain and senator obama were there in the middle of the campaign with the congressional leaders, where not only do we not come together, it broke out, people didn't come to physical blows, but they were verbal blows and it was chaos. and the democrats assembled in the roosevelt room, and i -- i went in uninvited, and i just -- i did it just to try to break

the, unit, the tension and to get a smile or laughter. and it didn't really have its desired effect. [laughter] >> because i remember ed as i recount in the book, i said, unit, please don't go out and blow this thing up. and the speaker said to me, we are not the ones that are blowing it up. and she was right. >> hank, you have got a great investment background that you've seen help governments operate here, a broad. in the, nobody has had a better perch from which to view the economy and to make judgments about the economy going forward. as i understand it when you were as secretary, you had to have your money in a blind trust. now the blind trust presumably is over. i don't want you to give us the names of stocks, although if you want to do what you're free to

do it. but give us an idea of the composition in terms of bonds, stocks, the portfolio of which you've had a chance to establish here in recent months. >> well, warren, first of all, you are a great investor. you do very good, very careful work. one of the things i learned during my career is i am not a great investor. so i need to find great investor's. i believe the system, the financial system is stable. , banking system is in better shape. i do believe clearly the recovery process has begun. you and i have a common worry about the fiscal crisis in this country.

>> i'm going to get to that. >> you have one of the best lines i've heard as it relates to that, but in any event. so i am -- you just need to understand also that what wendy and i are looking to do, we're going to devote the ballots of our careers to conservation and environment, and that's where our money is going. so i am not looking to make more. i would like to keep what i have, and so i am not looking at it with a really long-term horizon because i continue to believe with a long-term rise in, the best way is to invest in high quality companies and in stocks. that's what i believe in. and if i was a young person, i would be looking at companies that have got good, strong market positions for the long-term. so i have a lot of what i have is in fixed income markets and money markets, cached.

because many others i tend to be in growth equities because i still believe that the economy can go down and sideways and whatever. but outstanding, well managed companies, in particular companies that know how to operate globally will prosper over a long period of time. and that's the way you need to look at investment, is over a period of time. i don't put too much at stake in quarterly economic data, what happened to the stock market today or tomorrow. i think the right way to look at for a younger person is over a longer period of time it. >> i'm interested, you said you of substantial in fixed income. is that many don't worry about the decline of the value of currency? >> well, warren, you are serving not going to get a former treasury secretary talking.

[laughter] >> because i really, i really do believe that, and i work very hard, strong dollar is, is just very much in our interest and a central to the success and the preeminence of the united states of america. and i believe that the best way to have a strong dollar is, again, looking at it of a long-term view, have a strong economy and to have fiscal discipline. now i'm not going to give you do that's what's going to happen to the dollar in the next five or 10 years, which is, you know, when i really focused on because we tend to give away a lot of the money, you know, over a relatively short period of time. >> so if i make a trustee for my children and i said you've got to buy fixed income, would you prefer tips bonds which is

treasured protection type or the straight on? >> i would go to you, warren. [laughter] >> i would ask you and take your advice. but i would ask myself the question, which really gets back to where you're going to go, which is that again, which gives to currency a little bit. i have spent a lot of time outside of this country, and i've spent time in all of the major economies. and believe me, every other major economy, china included, has many more really significant challenges and problems than we do. they really do. and we are the richest, strongest economy in the world, but we have to deal with a relatively few, very important

challenges. and the biggest one is the fiscal crisis. and i shouldn't call it a crisis because it is not a crisis immediately that it is a challenge immediately. but one of the things i learned and what of the things i write about in this book is that it is very difficult to get government to act and to get congress to act and do anything that is big and difficult and controversial, and less there is immediate crisis. now we have an immediate crisis. and we still haven't got the regulatory reform we need. and again, that is something that is critical. so i have no doubt that we will deal with this fiscal challenge at some point in time, but the earlier we deal with it, the less costly it will be, the

greater our nation will be, the stronger our nation will be, and the less burden the younger generation will have to bear. >> let's go back to the fall 2008 again, and that very same weekend in september 12, through the 15th, and at that point, really on the friday it was a known the extent of aig's problems, even though they were going to just come cascading in a few days. but you did have this big problem with lehman and you called together a group of people on wall street and you thought you had them signed up and you thought they want to be signed but they ran into problems subsequently. but it seems to me that forgetting about lehman, that you have merrill lynch that followed a lehman bankruptcy, i think you and i would agree that merrill would have gone almost instantly.

>> right. >> what would've happened if they had made a deal on there on that sunday? >> it would have -- they wouldn't have lasted, in my judgment, you know, it wouldn't have lasted a week. what people miss, and i think it is easy to miss, was this was a doozy. these excesses have been building up for a long time. i knew we were overdue for a credit crisis. and i told the president back when i came to washington. but i didn't expect anything of this magnitude. that it had been building up and building up in the united states and in europe. and as you can see from reading the papers, it is still working its way's through the european system, but have been building up for a long time. and the institutions had been sitting on losses. we had been pressing them to

recognize losses, raise capital. so simultaneously, we had on the same weekend, we learned about the extent of aig's problems on saturday. lehman, it was meryl was going to be right there. so you had those three institutions. and as one said, we had washington mutual, you know, shortly thereafter and wachovia and then we had over the next weeks we had six european nations have to step in and recognizing institutions. so this was coming at us very quickly from all sides. >> and it is ironic, but in effect i think you talked about candles have an appetite for deals or something like that. but in effect he had made his deal which did not look like it was the greatest deal, he offered a 7% premium on the day

when public the next day the stock might have been at israel. but ineffective and he kind of say the system for? >> , i tell you, he wasn't confident, decisive ceo. , that there is no doubt that it was a much a stabilizing, stabilizing action. do you think we would've gotten to tuesday on aig if there had been action on merrill that they? >> i don't know. i don't know what would've happened, because i don't think, warren, i don't think we could have taken one of the big institution. >> now -- >> the system is -- i think the thing that is hard for people to understand is, you know, we had 10 institutions that had, you know, 50 to 60 percent of the financial assets in this country

and were so interconnected, i think we would have -- it would have in many ways we were, as bad as this is and it is terrible, but when we look at what could've happened, we're pretty fortunate. >> hank, given that british like failed warning about the situation a couple of days order, but in effect, they blocked the berkeley acquisition of lehman. do you think they understood what the consequences were? >> i don't know everything they understood, but remember, there was a requirement for a shareholder vote. >> but we overcame a lot things

in this country. [laughter] >> that's right. but the -- and then what we needed was, we needed a buyer that could do what j.p. morgan did with bear stearns, which was filled the capital hole and then guarantee the trading during the shareholder vote. because there was no authority to do this in the u.s. and what i think people have a hard time understanding, because we are the united states of america, and i had a hard time understanding and till i started overturning every stone to see what authorities we had, that there was no authority to guarantee liabilities, or to put capital into institutions. but in any event, i'm not sure what -- the british, i said in the book, i had used some

language when i was disappoint disappointed, but as i said in the book as i reflected on it, they obviously had their own issues they were looking at. and the regulator, it was for them, a very difficult, must've been a very difficult decision to let one of their banks go ahead, and in the middle of a run, lehman brothers, step in and make that acquisition and be confident that they had the wherewithal to do that. >> hank, lehman did go down on that sunday. and there was a limited part and a much smaller transaction. and i think was tuesday or wednesday that the british authority -- i guess the british

authorities said that if you had an account with lehman, they were keeping your security there, you couldn't take it out, i mean, they froze the accounts basically, what i gather came as a big surprise to you. it's working as a big surprise to me. >> i think that shocked the market. my recollection is it was tuesday, but it could be -- because i recall learning about it tuesday, and that was actually the day the aji risk. but what happened was, i clatter third party customer and the collateral a counts, you know, the broker-dealer and others were frozen. for a while. investors need to know their accounts were saved. and of course, when they weren't with lehman brothers and the

u.k., then it was a big erosion of confidence in the investment banking, the banking model. >> that wouldn't have happened in the united states. you would've had access to your security. as i remember it didn't publicize much but it was a huge shock. >> if they did it wasn't with me. mariner, the sec was a regular. so the sec was a regulator for lehman brothers, and was the one that had the lead in preparing for the bankruptcy, as -- because we knew it was going to be a possibility that we hoped to avoid it, and they were the ones that would have been talking to the various authorities during that period of time. but it sure came as a surprise to a lot of investors. and a surprise to me.

>> hank, you and i know it a huge investment banking and trading firm. and it is our only family asset. we can't sell it. and people are making lots of money. your head of the conversation committee. what sort of arrangement do you have with them? can anybody make 25 of 50 million a year? how are you going to treat these people so that they keep making money for us and they don't leave and go someplace else? >> well, i would say we have to talk about when it is we are doing this, and when it is we are making this decision to. >> let's say we are doing this today. [laughter] >> well, today warren, you've got to know that you and i, as i say and as i write in the book, and i would have these conversations with the wendy all the time during the nine periods, that i think that the compensation levels on wall

street, you know, are on the wacky. so i just believe that just in general during the nine times. and i think you would too. this is in general just in terms of how, number one. and number two, today in light of everything that has gone on, and the fact that the taxpayer came in and granted, the reason the taxpayer did was to prevent calamity, mccain and to have the whole financial system. so not just the big banks and investment banks, but hedge funds, everyone. i think that today restrained is very much in order to either top people. and i think the anger is coming from, a, if you have losses you are supposed to their responsibility for those losses. of the way i have talked about

it is, i have talked about and said i would like to see this anger channeled. i would like to see congress pew eight, you know, pressure. and i know they are working very hard to get the regulatory reform we need so that you don't need to ever have taxpayers come in and prop up, bailout in their present form if any financial institution. we need resolution authority. to any financial institution, any type of financial institution, if it is going to fail can be liquidated outside of the bankruptcy process in a way in which it doesn't take the financial system down and the economy down with that. so i would like to see congress get that done and get the systemic risk regulator that can look at every institution, no matter what the size is and type. and if they see this that are

input and comment restrained in. now i would like to see that it in terms of longer term compensation, clearly you need compensation -- my position is that it should be in equity for the high paid people. it should be -- that should be something that rewards long-term performance. that's the on thing that counts, long-term performance and outlined the incentives of the individuals with a compass and its shareholders. are we getting the hook? >> and gentlemen, we're done. >> thank you. [applause] >> thank you a lot. >> henry paulson serve as u.s. treasury secretary from 2006 to 2009, and as the ceo of the investment firm goldman sachs from 1999 to 2006. this event was part of the greater omaha chamber of commerce's 2010 annual meeting. to find out more visit omaha

chamber.org.

speaking with robert in more the third about his book they always said i was very a wide go, coming to grips with rates in america. i will start off with, who said that you would always make a white coat, and why did they say that? >> i think that was more of an internal feeling on my part. i grew up in a very passing time period during the 1960s. i was one of the few african-american fans, perhaps the only african-american family to ride the wave of millions of of why to left urban america at the time to go to the suburbs. at the same time many

african-american for coming off the land of rural america and going to the cities. so i thought very unique, i felt caught in between. i think two groups almost like two sides and it was a time period that was pre-multiculturalism, and so i felt internally that perhaps i was destined to marry someone who was white. rather than african-american. >> one of the first part of your book is you have a couple different sections, the first one called straddling the fence. how did you come to grips with your identity as an african-american male growing up in a predominantly white area of suburban philadelphia's? >> it was tough. i don't think i did. i think i still wrestle with that. the impact of that time period. i grew up with people who very good friends of mine.

i still have great friends from that time period. but they held numerous stereotypes about african-americans. i was fortunate both my parents worked, which was unusual for the time. i came from a dual income family. and so 10th grade rolled around and i opted out of public school system and went to a private school, and i had my first contact with african-americans actually pick my first girlfriend was in 10th grade and she was african-american. so i had to leave that situation and go someplace else i think to really work on my identity. >> what you think it means to be -- what is an african-american identity? >> today or -- >> either i guess today or what you felt growing up, what did it mean to you? >> that is an interesting question. a big question. i think we have stereotypes of each other and i subscribe to

something called crew position three. i kind of look at groups of people in our society and i look at the overall, their overall place in society. and i think we'll stereotypes about groups and we internalize the stereotypes. i was socialized as a middle-class person growing up in the suburbs of philadelphia. i'm not sure there's anyone identity that african-americans have or that whites have. but i think we do feel a sense of cultural difference, whether it is real cultural difference or not is up for debate, but i think we do a group of in group a versus outgrew. and one day i hope we get over that in this country. some sense of oneness. >> why did you decide to write the book in the first place? >> i felt i had a lot to get off

my chest. and i really think what my expenses were quite unique, i have three kids at the moment, and i start having kids late in life. i did marry a white female, and we now have for the first time in this history a mixed race movement, a biracial movement. and a lot of my thoughts today are centered around racial identity. i am fascinated by people who call themselves mixed race today, whereas up until the past 30 years, passed 25 years if you at any african-american ancestry within your background, you are considered african-americans. and so racial identity questions are still with us. i think they are absolutely fascinating. and so i really want to just dive into, write a book about how race change over the past 30, 35, 40 years. . .