The creator of the $700 billion bailout program, former Treasury Secretary Henry Paulson said today the financial system is stable and the economy is recovering but more needs to be done despite stronger-than-expected economic growth last quarter.
"The economy is on the road to recovery, but I think we could also use a little bit more certainty, more clarity, consistency, and I think that makes it easier for banks to loan, companies to hire employees," Paulson said on "Good Morning America" today.
Paulson, author of the new book "On the Brink," said he knew the system was on verge of failure in fall 2008 and if the government had not initiated the bailout, employment rates could have reached 25 percent.
"In terms of the actions we took, I have no doubt they helped us avoid disaster," Paulson said.
The former Treasury secretary agreed with criticism from Neil Barofsky, the special inspector general for the Troubled Asset Relief Program , when he said in a report that the bailout has not accomplished all f its goals and that there are still companies that are too big to fail.
"We have not fixed the problems we need to fix. We won't have fixed it until we put in place resolution authority so that no financial institution is too big to fail. Any financial institution regardless of type can be wound down, can be liquidated, without hurting the rest of the economy so the taxpayer will never have to put bailout money into a situation like this again," Paulson said.
In "On the Brink," which was officially released today, the former Treasury secretary gives an intimate account of America's 2008 financial collapse from the perspective of someone who occupied the inner chambers of the White House.
In nearly 500 pages, Paulson both defends many of his policies concerning the economic downturn but also admits failures.
In April 2007, he said the subprime mortgage mess was "largely contained."
"Today, of course, I could kick myself," Paulson wrote. "We were just plain wrong."
In the first chapter of the book, Paulson discusses his strategy to seize Fannie Mae and Freddie Mac by "ambushing" the companies with former President Bush.
"'Do they know we're coming, Hank?' President Bush asked me. 'Mr. President,' I said, 'we're going to move quickly and take them by surprise. The first sound they'll hear is their heads hitting the floor,'" Paulson wrote.
Paulson was criticized for a failure to stave off the Lehman Brothers' collapse through a government-brokered deal. In the book, Paulson defended his actions, saying the government had no legal basis to rescue the ailing bank.
When the bank was going under, he wrote that he phoned his wife to ask her to pray for him, fearing the system's collapse. His wife responded by reading one of their favorite Bible verses.
When it came to the controversial bailout of insurance giant AIG, Paulson said in his book that he hid behind a pillar during an emergency meeting with congressional leaders until a bout of nausea subsided.
Today he continues to defend his decision to save the company.
"I cared about one thing and one thing only, which is if AIG had gone down it would have been catastrophic for the American economy. It would have taken down the whole financial system," Paulson told "GMA."
Paulson Appears at Congressional Hearing
His troubles concerning AIG have not passed. Last week, Paulson appeared before the House Oversight and Government Reform Committee as part of a hearing on the controversial AIG bailout.
One point of the hearing was to determine why the U.S. government paid $62 billion in taxpayer dollars to AIG's trading partners and then pressured the insurance giant not to disclose the details of the deal to the American public.
Like Treasury Secretary Tim Geithner and Federal Reserve Chairman Ben Bernanke, Paulson said he was "not involved in the negotiations."
During his testimony, Paulson defended the decision to bail out the insurance giant.
"The decision to rescue AIG was correct and I strongly supported it," he said. "An AIG failure would have been devastating to the financial system and the economy."
Though the former Treasury boss said he did not take part in any decisions connected to paying back AIG's counterparties, he praised the work of the Federal Reserve Bank of New York and Federal Reserve on the AIG bailout.