i see this climate risk as the single biggest and most certain and formidable of risks that mankind faces. david: how do you had an interest in business? hank: the easiest place to get into in those days was harvard business school. david: lehman was on the verge of going bankrupt. is there anything you could have done differently with respect to lehman? hank: i tell you, i don't think -- david: would you fix -- >> would you fix your tie, please? david: people wouldn't recognize me. leave it this way. all right. ♪

i don't consider myself a journalist. nobody else would consider myself a journalist. i began to take on the life of being an interviewer, even though i have a day job of running a private equity firm. how do you define leadership? what is it that makes somebody tick? if you left the secretary of treasury, hank, you did something that was very unusual for secretary of treasury's, and many of them go out of the finance world or go into the finance world if they had not been there before. you chose not to do that. hank: i really enjoyed my business career. i had 32 years there, having an opportunity to serve my country, and what i wanted to do was take my experiences and apply them to addressing two of what i believe are the most pressing issues of our time.

u.s.-china relations, and climate change. david: many people say when you are in the finance world, you get on a merry-go-round and you cannot stop making money. but you said, i had enough money and i want to do nonprofit things. is that right? hank: i never had the disease or addiction to money. when i went to goldman sachs, it was 1974, the firm had had a couple of lost years. that i was interested at that time and really working on financial issues, working with clients, i was interesting and working. david: but when you were at goldman, you were not a person who bought their own private plane, you did not buy a big house in the hamptons. hank: we continue to live in the same house we built when i was making $36,000 a year. when i go skiing, it is at a

little area called arapo basin, where it is not a place where fancy people go. david: climate change, is it your view that climate change as we have called that occurrence, is it due to human activity or what have occurred without human activity? hank: david, it has been well documented that it is largely caused by human conduct. this is an enormous risk for our economic security, for our social stability. i see this climate risk as a -- about single biggest and most certain and formidable risk that mankind faces. david: do you think the paris accord, which the current administration has pulled the u.s. out of, those people in the government say we do not want to take climate change actions that some people like you are advocating. we want to get out of the paris accord. what constituency are they

appealing to? who is the constituency that says please, let's not do something on climate change? hank: i believe that there are very strong vested interests that have a different viewpoint than the average american. if you look at the average american, there is a high percentage of people who are concerned about climate change. it is just not there number one issue. -- their number one issue. when you look at the industries that have a vested interest, beginning with the oil industry, and all of the carbon-based fuels, and for instance, i think one of the things that is going to be very important in dealing with this problem are economic incentives. i think there is a whole variety of economic incentives we could put in place to put a price on carbon taxes and systems, but also, eliminating the huge subsidies we paid to discover

carbon-based fuels. we have no shortage of them today and there is no excuse for doing that. david: today, as we sit here, i think you have been to china out roughly 150 times or something like that? sec. paulson: a lot. david: how did you come to deal with china so much? sec. paulson: almost, david, by accident. i was in the chicago office of goldman sachs working with clients in the midwest, and i was not looking to move to new york, so the firm asked me to be a cohead of our investment banking division. with a couple other individuals who were in new york. as we were looking at how we might divide things up, we had a big business in europe and almost nothing in asia. one of the guys said to me, why don't you take asia, take china because it is closer to chicago. [laughter] than new york.

i was not overly curious, but i was interested. i began going to asia and so i came back and i talked with my bosses, bob rubin and steve friedman, and i said, i get the feeling that china is about to take off and i would like to do a deep dive and lopportunities . when i made the first trip there in 1991, and we have five people in the hong kong office. when i left to go to treasury in 2006, i think we had 1500 people in greater china. i put the pedal to the metal. david: today, we have two greater economies in the world, china and the united states. in your view, is there a clash between the two of them inevitable leading to a real-war and not a cold war? sec. paulson: i would begin by

saying that china is a strategic competitor. there are some compelling differences when we look at our national security interests. there also are some important shared interests in terms of global stability and things like climate change. but to get to your question, i am concerned, really very concerned about what i see as a militarization of the u.s. view towards u.s.-china. i will tell you what i mean. i take national security very seriously. but national security has bled into basically every aspect of the economic relationship. i look at it and i say -- i hear about cold war all the time, and there is no way this is a soviet-style cold war. china is very integrated into

the global economy. we are looking at the number one manufacturer, the number one trader, a big exporter of capital. david: you were assigned in the white house under president nixon. you worked for jon erlichman, what was that like? hank: i started in the pentagon in april 1972, six weeks before the watergate break-in. ♪

david: let's talk about your background. it might not have been predicted when you were growing up in illinois that you would be the treasury secretary, head of goldman sachs, a leader in knowledge about china. you grew up -- actually you were born in palm beach, how did you come to be born in palm beach? hank: i ruined a vacation. my parents were actually in a place called stuart, florida and i came prematurely, so i was born in a palm beach hospital. david: your parents had a farm. sec. paulson: they had a farm. you grew up on the farm, milking cows. hank: i milked some cows and baled a lot of hay. i did a lot of weeding in the garden. david: you said this is what you want to do for the rest of your life? sec. paulson: no, it sure was not.

i loved being in the outdoors. my family, god bless them, we would take me up to the northwoods in canada and take canoe trips. we carried everything on our back. we ate fish we caught, we picked blueberries, blueberry pancakes and so on. i wanted to be a forest ranger when i was growing up in high school. david: did your parents talk you out of that? sec. paulson: no, they encouraged me to do what i wanted to do. they really encouraged me to get a good education. my mom had gone to wellesley. her father had gone to yale. i chose dartmouth because it was in the northwoods, and it had small classes, focused on the undergraduate. david: before you got to dartmouth, you were a high school champion football player and wrestler? you were all-ivy football

player, as you were a defensive lineman. hank: offensive. david: all-ivy, honorable mention all-american, and also phi beta kappa. your nickname was the hammer, what was that associated with? you were good at building homes or what? [laughter] sec. paulson: no, it wasn't. i tended to be -- i hit pretty hard and tended to be forceful. david: when you graduated in 1968, you went to harvard business school. had you had an interest in business since you went straight to harvard business school? sec. paulson: i wanted to go to oxford and study english, but the vietnam war was in full force. i had a low number in the draft. i got into rotc program. i could get into at harvard, and it turns out the easiest place to get into those days was harvard business school. i wish i could tell you this had been part of career planning but that is how i ended up at harvard business school.

david: you graduated 1970 from harvard business school and went to work at the pentagon. how did that happen? sec. paulson: at harvard business school -- i basically worked at dartmouth. harvard business school, i did not have any business background, i spent most of my time at wellesley courting my wife to be. one class i did a fair amount of work in was a class that was taught by someone who had been a former assistant secretary of defense. he recommended me to work in the pentagon for a small analysis group that worked on projects for the top leaders of the pentagon. that really transformed my life. david: you got assigned to the white house under president nixon and worked for jon erlichman. what was that like? sec. paulson: i started in the pentagon in april of 1972, six weeks before the watergate break-in.

it looked like he did not understand the implications at the time. i was there through the election, it was a landslide victory over mcgovern. i got a big promotion. i was going to be erlichman's deputy for economic policy. then watergate hit and blew up, and i watched these people at very senior positions get carried off. erlichman got convicted after i had left, but i looked at a number of people there in deep, deep trouble. it made a huge impression on me. the positive impression was george schultz, secretary of the treasury, he had two guys who worked for him that i had a very good working relationship. david: so you went back to your

native midwest, chicago, and joined goldman sachs. how did that come about? sec. paulson: i got to tell you -- careers are a funny thing. i have never been big on career engineering. when i graduated from dartmouth, i did not know what an investment banker was. but i learned in government that i like multitasking, i liked economic policy and financial issues and problem-solving. i figured out that investment banking might be a good thing to explore. i also determined i never wanted to live in new york. ask me why, i don't know. that was my view. david: you are at goldman and obviously must've been doing a good job because you got promoted every couple of years or so and wound up being the ceo of goldman sachs, a job you did not aspire to. right? sec. paulson: you remember what

it was like when we graduated from college and business school. if you wanted to run something, you do not go into finance or investment banking. you went in because you liked the markets and wanted to work with clients, you wanted to work on multiple problems. that is why i picked goldman sachs. in 1994, the firm had problems, i went off to new york. told wendy, well we are going to pick the next head of the firm. don't worry, i won't do that. but then i called her and said i have been drafted to turn things around, but i will only be here for two years. we joke because that was a rolling two years. i was there for 12 years in new york and i loved it. david: you became ceo and goldman prospered, did pretty well. then george w. bush becomes president of the united states and he made a couple of interest -- couple of entreaties to you to be secretary of the treasury. you repeatedly said you were not interested.

is that right? sec. paulson: correct. david: why were you not interested? sec. paulson: i enjoyed doing what i was doing. i had a family that was vehemently opposed to the president. my mother, my wife, my kids. i think also at the root of things, although i did not tell myself it was the reason, i knew i was doing a pretty good job running goldman sachs, so i said no a few times. they kept coming back. the last time jim baker made a pretty compelling case, and more than anything else, what hit me was i looked at things and said, guess what? i go around, i recruit all the time at business schools. i tell people welcome change, change is your friend. we all hate change. maybe it was fear of failure that was preventing me from

serving my country. as soon as i saw that, i said i will not let that stop me. i made the jump. david: when you joined the government as secretary of treasury, you expected the economy would be in reasonable shape. because the economy seemed to be in reasonable shape. is that correct? hank: yes. david: what happened? sec. paulson: very early on, in the first meeting that i had with president bush at camp david, he got his economic team together, he wanted me to talk about entitlement reforms, that was one of the things that brought me to washington. i told him i wanted to talk about the financial crisis. i did not see one coming like we had, but i saw excesses, and i had seen them in 1994, 1998. i thought we were due for turbulence in the market. the whole discussion was about that. david: ultimately, the banking system came back and the financial system came back, but as you look at the system today, could something like that happen again? sec. paulson: i hate to say this, but we have less authorities today than we had then. ♪

david: lehman was on the verge of going bankrupt, and you did not have the authority to save lehman. i know everyone has asked you about that since then. in hindsight, is there anything you could have done differently? sec. paulson: boy, i tell you. i do not think there was. we tried everything we could to get a buyer. lehman was a bigger problem than bear stearns because they were insolvent. there was a big capital hole. there was no way that a loan was

going to solve the problem. it took capital or a loan guarantee. the thing about lehman as i look back, we tried very hard and came very close to getting a deal done with barclays. as we look back on it, as bad as that was, that was not the worst outcome that was possible. the crisis had been grinding on for about a year. for many weak financial institutions. we had three financial institutions going down the same week. lehman, merrill, and aig. it turns out we had one buyer. and bankamerica bought merrill. if they bought lehman, merrill would have failed and it would have been a bigger problem. the other thing i will say about lehman, as bad as it was, it accelerated the crisis, it was a symptom, it was not the cause.

david: ultimately, legislation did get through congress, but it failed in the first vote in the house. what did you think then? sec. paulson: oh, boy. we had a number of terrifying moments, and that was one of them. because -- here is the best way to describe it. for months, we wanted to get fiscal authorities. it was a big thing for the president to authorize this. there is no way you want to say we have an emergency, and give us these authorities, and then i get them and be naked with nothing you can do to prevent the meltdown of the financial system. when we went to congress, the cupboard was bare. the president needed to look ben bernanke in the eye and have him assure him there were no authorities the fed had, there

was nothing more we could do. we had to go and get these authorities. david: the legislation was designed to buy assets initially, but you ultimately decided not to buy assets but inject money and various banks. is that correct? sec. paulson: i felt putting capital in banks was the only way to nationalize banks. when you do that, it is a costly thing to do, and it precipitates other bank failures. i wanted to avoid that, and i had this theory it was the increase capital and recapitalize the banks. in the two weeks we were up at congress, the situation worsened. we had two huge bank failures in the u.s. and so, when i went to the president and basically said

to him, guess what, sir. illiquid asset purchases will not work. he said, you told the world that is what you are going to do. what are you going to do? we are going to have to explain we made a mistake and we need to put capital in the banks and reverse ourselves, and that is what we did. david: ultimately, the banking system came back, but as you look at the system today, could something like that happen again? with the legislation we now have, are we better able to protect against something like that? sec. paulson: our financial system is much stronger than it was. the banks are better capitalized. it is much less likely to start in the u.s. there is less dry tinder to start a fire. i hate to stay this, but we have less authorities today than we had then. the number one problem we had by far was we had a financial system that had outgrown our regulatory system. our regulatory system and

authorities had been put in place after the great depression. when there was a run on banks, and we had a situation were 60% -- where 60% of the credit was flowing outside of the banking system. david: you worked closely with ben bernanke then and the head of the new york fed. in the current administration, there is tension between the fed and the treasury and the fed and the white house. do you have any comment on whether the fed is sufficiently independent, and should we do anything to make sure it is more independent than it already is? sec. paulson: the thing i am most proud of was that the solution came on a bipartisan basis. i think the last two times congress has acted on a bipartisan basis, anything that was consequential, was the tarp authorities and the authorities for fannie and freddie. the way it worked and worked across administrations. to get to the current situation, i never ever want to bet against what we can do as a crisis, during a crisis.

i do know stephen mnuchin is very competent and understands financial issues. i have a high regard for the chairman of the fed. i believe if we had a crisis, they would figure out how to work together. david: any regrets in this incredible career and what would you see as your legacy? sec. paulson: if we had not had the financial crisis, i set up the first environmental department of treasury. i would raise clean technology funds to be housed at the world bank. president bush said i could work on coming up with some standards for carbon emissions, because there were problems in the carbon market. there are plenty of things i would not do if i had not been waylaid by the financial crisis. i actually look back on it as the honor of my life. to get to serve my country during a time of crisis and help

us get out of it. david: thank you very much for a very interesting conversation. thanks for a great career and your service to our country. sec. paulson: david, thank you. david: thanks very much. ♪

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viviana: coming up, the year's most compelling conversations on business, finance, and politics in the americans -- in the americas. leading figures in financial markets argue as a 10-year boom ebbs. could the glass still be half-full? >> i would almost call this a goldilocks moment where it is not so bad, not so good. >> we have nothing to fear about the recession right now except for a fear of recession. viviana: the fed has spun 180 degrees from tightening to accommodation. but the pivot was hardly smooth. >> we are in a place where we can be patient and flexible. >> the chairman is doing a good job. >> we will act as appropriate to sustained expansion. >