Paulson defends work as Treasury secretary
WASHINGTON -- Defending the government's handling of the economic crisis last year, former Treasury secretary Henry Paulson said Wednesday that the Bush administration's responses were not perfect but "saved this nation from great peril."
"Many more Americans would be without their homes, their jobs, their businesses, their savings and their way of life," he said in written testimony prepared for a hearing today.
While losses have been staggering, "that suffering would have been far more profound and disturbing" had the government not intervened, he will tell the House Oversight and Government Reform Committee.
Paulson's defense came as Congress began an independent bipartisan probe into the government's handling of the crisis. Democrat Phil Angelides and Republican Bill Thomas, both politicians from California, were appointed to lead the effort.
Paulson, who orchestrated the creation of a $700 billion bailout fund for banks that Congress approved last fall, said the government did what was necessary to restore confidence.
Paulson also defended himself against allegations that he and Federal Reserve ChairmanBen Bernanke pressured Bank of America into acquiring Merrill Lynch, despite mounting financial losses at Merrill that were ultimately absorbed by Bank of America stockholders. Bernanke has denied threatening to oust the bank's CEO, Kenneth Lewis, if he abandoned the takeover.
Paulson said he told Lewis that reneging on the promise to purchase Merrill would show "a colossal lack of judgment." He then pointed out to Lewis that the Fed could remove management at the bank if it saw fit, he said.
"By referring to the Federal Reserve's supervisory powers, I intended to deliver a strong message reinforcing the view that had been consistently expressed by the Federal Reserve ... and shared by the Treasury, that it would be unthinkable for Bank of America to take this destructive action for which there was no reasonable legal basis and which would show a lack of judgment," Paulson said.
