WASHINGTON — One thing most Democrats and Republicans around the nation seem to agree on is that their government is too cozy with Wall Street — and that that’s not a good thing.
The dissatisfaction is largely rooted in the fact that the major financial institutions who played a part in bringing about the recession were rewarded with rescue packages and are beginning to hand out large bonuses again while millions of Americans struggle economically.
Treasury Secretary Timothy Geithner, former chair of the New York Fed, routinely faces accusations from constituents and members of Congress that he prioritizes the interests of wealthy banks over average Americans.
But in an interview with CNN’s Christine Romans Wednesday, Geithner’s predecessor Henry Paulson shone some light upon why he deemed his close ties to Wall Street valuable.
“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.”
While a strong understanding of markets seems to be an important prerequisite for Treasury chief, ties to Wall Street can create conflicts of interest when making key decisions as banks often prefer different policies than the 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 said after the interview that Paulson criticized banks for handing out large executive compensations. She described him as admitting that pay was “out of whack” even when he headed Goldman Sachs.
Large Wall Street bonuses are unpopular among the public as the national unemployment rate hovers at nearly 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.
This video is from CNN’s American Morning, broadcast Feb. 10, 2010.