Get Money Out To The Economy Quickly, Ex-Treasury Secretary Says

Apr 2, 2020
Originally published on April 3, 2020 7:09 am

Updated at 5:36 p.m. ET

Hank Paulson says the world and America are "facing a health and economic crisis unlike anything in our modern history."

Paulson knows a thing or two about a financial crisis. In 2008, as Treasury secretary, he helped steer the United States out of the worst financial crisis since the Great Depression.

He says the coronavirus crisis — which has brought much of the U.S. economy to a halt and put millions suddenly out of work — is very different from 2008, when the global financial system came close to collapsing.

This crisis "didn't begin in our financial system, which was very strong," Paulson tells NPR's Steve Inskeep. "Today, the economy is suffering because it was shut down to protect human health — having nothing to do with the underlying strength of the economy or the financial system."

Getting through it and limiting the damage to the economy will require huge tasks: containing the virus and implementing Congress's $2 trillion economic rescue package quickly, he says. That includes direct $1,200 payments to most Americans and a boost to the unemployment insurance program.

"We've got to get money moving out into the economy to the people who need it — the most vulnerable, to the small businesses, to the big businesses. And that's the big job ahead of us," Paulson says.

However, according to a memo drafted by House Democrats, people who do not have direct deposit information on file with the Internal Revenue Service may have to wait up to 20 weeks to receive cash payments

Treasury Secretary Steven Mnuchin has acknowledged it would take more time for those who didn't have addresses on file but suggested on Sunday that he expected payments to go out by mid-April.

Paulson says Mnuchin and Federal Reserve Chairman Jerome Powell have "got their work cut out for them to get this money out where it's needed."

Paulson has this additional advice for getting through the crisis: "It's vital we remember that we don't need to let fear and panic defeat us, and we shouldn't let divisiveness defeat us."

"The best-case scenario is ... we contain the virus quickly because the extent of the damage to the U.S. economy is going to be determined by how quickly we can begin to resume normal business activity in different industries in different parts of the country," he says.

The worst case, he says, is "this takes a long time. And if it takes a long time, you know what? We're still going to get through it."

Could the country see another Great Depression?

"I don't think so," Paulson says. "We have tools and knowledge we didn't have before. And I think we're a rich country and we have strong institutions and a strong history. And our government knows how to work."

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We placed a call yesterday to an American sheltering at home. He is Henry Paulson, the former U.S. Treasury secretary who, until recently, was also a frequent world traveler.

HENRY PAULSON: Well I tell you, yeah, I'm spending a lot of time with my family. We're getting to know each other really, really well. And it's interesting - my wife and I love each other, and she's gone from lamenting my long trips to China for longing for them again.

INSKEEP: This is Hank Paulson's first broadcast interview about our global crisis. He has relevant experience. As Treasury secretary, he oversaw the rescue of the U.S. economy during the financial crisis. He structured a $700 billion bailout in 2008. At a vital moment, he got down on one knee to ask House Speaker Nancy Pelosi to support it. Before that, Paulson was head of the powerful financial firm Goldman Sachs. And his employees included Steven Mnuchin, the man who is now treasury secretary. In recent days, it was Mnuchin's turn to negotiate with Congress over a rescue bill. Paulson says he supports the $2 trillion in aid to workers, airlines and many other businesses.

PAULSON: A week or so ago, I actually thought we might have another financial panic. But the authorities that Secretary Mnuchin has as a result of the CARES Act has taken that risk off the table.

INSKEEP: But we have to be frank that, according to surveys, large majorities of Americans do not trust the president, do not approve of this president, do not approve of this administration. What do you say to people who do not trust the government, this particular administration to spend the money properly?

PAULSON: What I say to them is we should be reassured that Steven Mnuchin is secretary of the Treasury. He's got a deep understanding of capital markets. He has the confidence of the president, which is critically important, and the confidence of both parties in Congress. He got a number of things done with them in the past. And he worked to get this done. And he's calm. He's unflappable. But this is a very difficult job.

INSKEEP: Can't believe I'm asking this question, but is $2 trillion enough?

PAULSON: Steve, you know, the sad truth is it probably isn't. But we need to get through the night first with this bill. And this is huge - $2 trillion. And so the first priority, by far, has got to be to make sure we get this money where it is needed and get it there quickly. The first challenge is to contain, obviously, the virus to save lives, but we also need to limit the damage to the American economy while big parts of it have been shut down. So that's got to be the first challenge. And, you know, I assume more will be needed.

INSKEEP: What is the role of fear in a crisis like this?

PAULSON: Fear is the enemy. I say over and over to people, of course, you've got to be careful. Of course, you've got to be disciplined. Of course, you've got to be patient. But don't let fear defeat you. When I was the CEO of Goldman Sachs, our offices were located downtown nearby to the World Trade Center. And so we had people in the Goldman Sachs offices looking out the window when the second plane hit, watching. It was just terrible...

INSKEEP: 9/11, yeah.

PAULSON: ...Watching people jump out of the World Trade Center. That was traumatic. But one of the things I found was those people that stayed engaged, either came back to work or were working from home, did so much better than those that just stayed there, watching those TV clips of the plane flying into the World Trade Center and going up in flames over and over and over again. And I think the same today. Those that are engaged, either working remotely or focusing on their family and on their future are going to be in better shape than those that just endlessly are on social media, tracking the latest death toll.

I saw the same thing a few years later when I was running Goldman Sachs. And there was another pandemic. This was the SARS crisis. And we had a lot of people in Hong Kong. And again, they had to be smart. They had to be careful. They had to protect themselves and their health. But those that stayed engaged were much better off. I found it myself during the financial crisis. Working around the clock, I didn't have time to be afraid. But at night, you know, when you'd wake up and big problems seemed huge, and huge problems seemed insurmountable, that's when you dealt with fear.

And to me the other thing with fear - me personally - is praying. And I got on the phone, called my wife Wendy. And she gave me that verse from Second Timothy in the Bible that has meant so much to Wendy and me, that God hath not given us the spirit of fear but power and love and a sound mind. And that was all I needed to get going. But everybody's going to deal with fear and trauma in their own way, but it does not have to defeat them.

INSKEEP: I guess part of managing fear is to face it, to be frank and honest about what the possibilities are.


INSKEEP: In your mind, what is the nightmare scenario, and what is the best-case scenario?

PAULSON: The best-case scenario is that we contain the virus quickly because the extent of the damage to the U.S. economy is going to be determined by how quickly we can begin to resume normal business activity in different industries in different parts of the country. And to me, the worst case is this takes a long time. And if it takes a long time, you know what? We're still going to get through it. So people say to me, could we have another Great Depression? And I'm saying, I don't think so. I don't think - because I think we've learned so much from the mistakes after the Great Depression, and we have tools and knowledge we didn't have before. I'm even more concerned about other countries around the world that don't have the resources, don't have the knowledge in so many developing parts of the world. And I think that's the other thing that's going to make this a really challenging period - we are interconnected. There is no way we can, for any extended period of time, disengage from the rest of the world.

INSKEEP: Secretary Paulson, it's always a pleasure to talk with you. Hope to see you in person again when that's possible.

PAULSON: Steve, I do, too. And keep up the good work. Thank you. Transcript provided by NPR, Copyright NPR.