Meet the Press   |  September 15, 2013

4: Five years after financial collapse, has anything changed?

Former Treasury Secretary Hank Paulson visits Meet the Press to analyze the current American economic landscape and how it's fluctuated in the years following the financial collapse.

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This content comes from Closed Captioning that was broadcast along with this program.

>>> we are back. on the brink of economic collapse , that was the state of the u.s. economy five years ago. what is our economic reality now and our future? joining me former treasury secretary hank paulson , he is the subject of a new documentary on netflix calls "hank," five years from the brink. also joining me former congressman barney frank , one of the co-authors of the wall street legislation known as dodd frank and cnbc's maria bartiromo . welcome to all of you. such a big topic and, hank paulson , i think the obvious question, we staved off collapse, but five years later is the economy better off than it was?

>> well, that's an easy question. it's much better off than it was. we avoided a very bad fate, things could have been as bad as the great depression but today the economy is growing at 2% and although that's not enough, it's -- in many ways it's something we can take satisfaction in given the amount of deleveraging that needed to be done, consumers and institutions. and capital markets are behaving as normal. we still got some problems we need to address.

>> barney frank , one of the issues that coming up in asking better off or not question five years later as senator elizabeth warren said, look, the banks are 30% larger than they were, too big to fail. she asserted is still a reality. could what happened five years ago happen today?

>> it could not happen in the same way. the biggest single cause of the problem last time i think everybody agrees was that mortgages were being given to people by institutions that shouldn't have given them to people who shouldn't have received them and then they packaged them and sold them to people who didn't know what what was in them. only one prohibition mostly pro-market, doesn't tell the financial community they can't do this or that. we do try to say if you take risks you should be responsible if they go bad. but we banned the bad mortgages. i very much admire senator warren but she's wrong if she thinks that. here's what the law said, this is bipartisan as this whole thing should have been. secretary paulson suggested the basic approach . some large institutions too big to fail out taking account of the consequences so have the power in federal officials to step in, put those institutions out of business. as i said i have one disagreement with sarah palin . she was right we enacted death penalties for big bank, not old ladies and the bank is abolished. some of the debts may have to be paid to prevent there from being contagion but any penny advanced by law has to be recover eed by the secretary of the treasury from the largest institutions in america. what happened with aig and other institutions that cannot happen again. can you not if you are overly indebted receive help from the federal government paying your debts and stay in existence.

>> here's the reality, maria bartiromo . you look at the favorability of wall street firms still very negative, 42% on the negative side in our latest poll. as i talk to ceos this week and bankers, they say, look, one of the issues we have to keep so much capital in reserve now there's not enough capital to invest. that ultimately hurts economic growth . we're not able to make as much money. make as many deals and we have tremendous income inequality . "time" magazine said did we win in all this.

>> i agree with all that has been said. on the capital front, capital has doubled. liquidity has doubled or tripled. i think the industry is in much better shape. we need to get beyond the conversation of is wall street evil? are the bankers evil? and causing pain? and toward the conversation of, how do you create sustainable economic growth ? that will answer the issue of inequality. because with growth comes jobs. so we need to come together and figure out how businesses, banks included, are actually going to spend that money. trillions of dollars on the balance sheet. you're right. they're signaturen 0 it but the idea that capital has been raised is absolutely a positive no a negative the fact that --

>> hear, hear.

>> i couldn't agree more. to me that's what it's all about, sustainable economic growth and i think the best thing --

>> what we're still -- our growth is so sluggish, right?

>> it is sluggish and so what we need to see is we need to see democrats and republicans coming together to deal with some of the big structural reforms we need. immigration reform , we need a new tax system. i could go on and on and so that's what washington really needs to focus on.

>> and these are the reasons that companies are sitting on cash.

>> remember, by the way, america doesn't exist alone in the world . i mean i just listen to a group of people act as if syria was one of the a1 states and could step in there and run it. we deal in an international world. if you look at the developed economies, yes, we're not doing as well as we'd like but we're doing better than any other just about. and these are our customers and there's a slowdown in china so given the economic reality i think we're doing well. i do want to add one thing, though, to your question about those boar beleaguered bankers who have been forced to do so much to keep from not being able to pay their gets they can't lend money. if they really are running businesses that are so stressed that they can't do their basic work, why are they paying themselves so much money gentleman where did these enormous salaries come from if they were in fact in such serious trouble?

>> right.

>> thank you for giving me that one. okay.

>> but your point is to get beyond -- to get beyond some of the resentment of the bankers and get to a place where we actually have more hiring going on, more investment going on and washington plays a more constructive role beyond whether it was the bailout of the banks which changed our politic.

>> right, i would like to come back to that, david. because what we did was very un unpopular. very unpopular because we never made the case. i was never able to make the case of what we did was for the american people to prevent economic disaster . it wasn't for the bankers. but i want to also make the point is we will have other financial crises . that's the history of mankind. as long as there are markets there will be crises. most of them have been manageable. we want to avoid these big dislocations like, you know, the great depression or had a 2008 which easily could have been the great depression but we have to continue to clean up our messes. we need to fix fannie and freddie, okay. that -- we should be focused on that. we need to focus on some things in the shadow banking market that --

>> yeah, but before you make your point i want to ask you one newsy question. who should be the next fed chair? i don't want that to go unanswered.

>> i'm sorry to disappoint you. i'll be honest i'm not in that position anymore. i have too many friends involved there. it becomes too deeply personal for me and, you know, there's a trade-offment you leave office. you don't have a lot of power and don't have to make decisions but you don't have to annoy a lot of other people either so i'm going to duck that one can i say --

>> very quickly.

>> first of all, many of the banks didn't want this mope. it's not -- secondly the federal government made money on the advances to the banks. what cost us money was the automobile industry bailout. but we made money in the banks.