Henry Paulson: My close ties with Wall Street were ‘a huge help’

David Edwards and Sahil Kapur
Raw Story
Wednesday, February 10th, 2010

One thing most Democrats, Republicans and Americans of all ideological stripes seem to agree on is that their government is too cozy with Wall Street — and that that’s not a good thing.

The anger is largely rooted in the fact that the major financial institutions whose decisions helped cause this troubling recession were ultimately rewarded with massive rescue packages, and the public perception is they’ve since returned to business-as-usual.

The common belief is that this is because the government officials, notably in the Treasury Department, tends to look out for wealthy banks over average income earners. Treasury Secretary Timothy Geithner, former chair of the New York Fed, routinely faces this charge from constituents and members of Congress.

But in an interview with CNN’s Christine Romans Wednesday, his Bush Administration predecessor Henry Paulson shone some light upon why he thinks the close ties between Treasury and Wall Street are a good thing.

“In hindsight it was a huge help,” Paulson said, when asked of his own history as former CEO of Wall Street giant Goldman Sachs.

“One of the things I brought to the table was understanding markets, understanding what was going on at the different financial institutions,” he continued. “And also, the fact that I’ve been a CEO helped me when it came to the decision-making process. I needed to be talking to the heads of all of the major firms.”

Few dispute Paulson’s claim that a strong understanding of markets is a necessary prerequisite for those in his former position. But the frequent complaint is that individuals with his kind of background tend to prioritize the well-being of his former colleagues over the general public.

“I was driven only by one thing, which was an understanding that if the system collapsed, the price would be paid by the American people,” Paulson said. “I certainly didn’t want to be the Treasury Secretary sitting in the seat when that happened.”

CNN’s Romans, reflecting on the interview, claimed Paulson criticized the large bonuses bank executives are receiving today as well as while he was heading Goldman Sachs.

Massive Wall Street bonuses are a central qualm of the public as millions of Americans are struggling and the unemployment rate hovers just under 10 percent. In 2009, current Goldman CEO Lloyd Blankfein was awarded $9 million in bonuses while JPMorgan Chase & Co. CEO Jamie Dimon received $17 million, according to Businessweek.

In 2005 alone, Paulson won $37 million in bonuses for his running of Goldman Sachs. In 2007, the New York Times pointed out that Paulson held a record for Wall Street executive compensation received in a year, though his compensation was bested by his successor, Lloyd Blankfein, who later received $67 million in compensation in a year.