[MUSIC]. [APPLAUSE]
>> Thank you. Please if you can go for the far seat. >> [APPLAUSE]
>> It's an absolute honor to have you here, and if you don't mind we
want to take you back in time a little bit and ask about your time or your thinking
straight out of business school. So we were very lucky to get
enrolled into this program and we got two years to add
value to ourselves. But most importantly we
are encouraged to take time off to reflect on our career choices and what
it is that we want to do after school. Naturally we are very,
very confused at this point. Take that advice to heart. So how intentional were you about your
career coming out of business school? >> I would tell you, I was sort of
an accidental investment banker and an accidental CEO. And a matter of fact,
when I was recruiting at Goldman Sachs, I was always very suspicious
of students who said they came out of their mother's womb knowing
they wanted to be an investment banker. So to step back,
you won't hear many stories like mine, because I was an English
major at Dartmouth. I went there thinking I wanted
to be a forest ranger or work somehow in conservation. I was going to go to Oxford. I had a rental scholarship. I was going to study English. But I had a very low draft number. And I could get into the ROTC at Harvard. And so I went to Harvard Business School. I just turned 22,
I hardly knew what business was. In those days, if you were a good
student in an Ivy League School, you didn't admit you wanted
to go into business. So when I told some of my friends I was
going to business school they almost throw up. So I went with no business experience, and I got to Harvard and
I'd been a very serious student. And I worked hard in college, but
everybody seemed so much older. You know, they were 27 or 28. Some of them were married,
and I was dating my wife, Wendy, who was at Wellesley. So I was out at Wellesley really
more than I was at business school. And so
I didn't even know what an investment banker was, and I certainly wouldn't have said I wanted to be an investment banker. I did a lot of work in one of
the professor's classes, and he had worked in the Pentagon. And so there is this small group, this analysis group that McNamara
had started when he was there. And I got asked one day whether I
want to interview for this group. And since I was going to
go in the Navy anyway, then this meant I wasn't going to
have to go on my Navy cruise and I could be with my wife to be and so on. It seemed like a pretty good deal. And it turns out that this group,
there were six people, four of us went on to become CEOs. One was Steve Hadley who became the
national security advisor to George Bush. Another was John Sprat who was
a couple years older who became Chairman of
the House Financial Services Committee. So it was an interesting
group to work with.. So that's how my career took shape. >> So
you actually came out of business school, you took the two public office positions,
Department of Defense and then followed by
the President Nixon's administration. >From the outside it looked like
you had it all figured out and you were well on the way to
getting a Senate seat [LAUGH]. >> No, I did not have it all figured out,
and I never worked in business. So I wore a suit on special
occasions to go to church. I never worked in business. And so I got there to this analysis group,
and I learned a lot when I was there. It's amazing how much I
learned because I have this view that it's not just
coming up with a right idea. Everybody can learn the computational
skills, analytical skills and so on. But it's the people skills that matter. >> So why the shift into Goldman Sachs? >> Well, I would say this. You're moving faster than I. >> [LAUGH]
>> Because literally, what I learned when I was there was I didn't know
what the word mentor was. But I found that when I would work for
five or six different people and on different
assignments, so I did the same work. And some really appreciated my skills and
others didn't. Some gave me the help I needed,
others didn't. And one of the things I worked on,
I worked on my first bail-out there, believe it or not. It was the Lockheed failure and
the Lockheed loan guarantee. So I had a chance to do that, and I got
to see how the political process worked. And as a result of that
John Connolly had introduced me to some people in the White House
who wanted me to go there. And then I learned that almost as important as what I was
doing was who I was doing it with. It really made a big difference. So I interviewed all of the six different
directors of the Domestic Council, and I picked the guy that maybe
the least interesting work was going to be under him. But I thought I would
learn a lot from him. And then it turned out I got to work
on something I was very interested in, minimum wage, tax policy,
I was the liaison for Treasury. And so one of the things I
learned was that it was fun for me to work on financial problems. And that's why I decided
on investment banking. And even investment banking was accidental because I knew I didn't want to work in New York. So I talked to regional investment banks,
and it was only when I had a job offer from a company called
William Blair where the CEO said, yeah we'd like to have you come here but
you're very aggressive, ambitious. We don't think you'll be
happy with a regional firm. Why don't you talk to Goldman Sachs and
Saloman Brothers? And with Goldman Sachs, they rank like number ten in
the league tables in those days. And I ended up talking with a few
other firms, Morgan Stanley, White Weld, so on, but I really
liked the people at Goldman Sachs. I met people like Bob Rubin and
Steve Freedman and a whole bunch of names you wouldn't know,
but they were. >> [LAUGH]
>> People weren't there, but they made a big. So I just basically said,
I feel comfortable with the culture. And I learned that almost as important
as what you do, is who you do it with. But if you had asked me out of college,
was I going to be an investment banker, I couldn't have told you what
an investment banker was. And in business school when I was
there The hot thing in those days, when I graduated from
Harvard Business School, let me say, the first two years I was at Goldman
Sachs, they lost money in '73 and '74. That people weren't going to investment
banks out of business school, they all wanted to go to Mackenzie or BCG. And the hottest thing was Hilton Head. You know, Sea Pines,
real estate development. You pictured people lighting
cigars with hundred dollar bills. >> [LAUGH]
>> And so, wherever the students
wanted to go that was all, just about before it would blow up,
that's where they wanted to go. >> [LAUGH]
>> So, 32 years later, you made the exact opposite transition going into public
office as the Secretary of Treasury. So can you walk us through how you made
that decision and how were you a different person then than the person who
went into finance 32 years ago? >> Yeah, but again, brevity may not be
one of my virtues but will say this. That when you went to Goldman Sachs,
and you went into investment banking, you didn't go because you
wanted to run something, you wanted to work with clients, okay? If you wanted to run something,
you went to work for a real company. So I had no interest in running something,
I wanted to work with clients. And so again I'm just saying
this in terms of career advice because I am suspicious
of career engineers. People that plan it out
every step of the way. And I'd had people come up to me at
all the time at Goldman Sachs and say Hank, should I do arbitrage or
should I do private equity or
should I be doing corporate finance? And I'd say, what is it you like,
what is it you're going to do well? And so I only wanted to work with clients. And so
I was in Chicago working with clients and was really focused on
a wide range of clients. I turned down a variety of promotions,
I stayed in Chicago. When finally they put me on
the management committee, I ended up starting a private
equity division from Chicago. Co-heading investment banking
from Chicago and getting Asia in my portfolio because my partner
in New York said he wanted Europe and he said, Asia's closer to Chicago. >> [LAUGH]
>> So that's how, and I did. So my career took a whole lot of, only as time went on that I
learned that I enjoyed managing. And then only when we had
Bob Rubin went to run, went to work for Bill Clinton in
the White House and then Treasury. And his co-head had a physical problem and had to leave at the same time
Goldman Sachs had trading losses. And I was in Chicago and the management committee had to
pick the next management team. I told my wife it's going to happen over
the weekend, don't worry, I'll come back. And Goldman Sachs had losses and
I had to have her send a couple suits. I had to go buy stuff, I stayed there. And I told her, I would just do this for
two years and it was a rolling two years. I was there for 12 years. So I would just, I tell that story to say that if I think
I had said I want to run Goldman Sachs, I would have come in and I don't think
I would ever want to run Goldman Sachs. I just focused on doing what
I was doing in front of me. Enjoying it, learning and growing. Now in terms of, boy, being Secretary
of the Treasury, it was interesting. I sit in this group because I
think back to 2006 because I had agreed to be a speaker at
Harvard Business School and I had agreed to do that long before
I thought I'd be Treasury Secretary. And so
I was standing up talking to students knowing that I was going to
be Treasury Secretary. And I remember thinking, I use to go and
recruit all the time, and I would say to people, you know,
the world is changing quickly. The pace of change is increasing, embrace change,
change is your friend, etc, etc. And I was thinking, my stomach was
churning as I was thinking about that change, and thinking my God,
I'm going to have to eat my own cooking. Because we all say we like change,
but we hate change, really. >> [LAUGH]
>> It's a difficult thing. And so as I was running Goldman Sachs,
I enjoyed it. I thought I was doing it well and
so when I got the first approach from the White House,
I immediately turned it down. I had a wife and a mother and two kids who were very, did not favor George Bush. >> [LAUGH] >> And so I turned it down and then they came back a second time. This was when I did a lot
of work with China, and so Hu Jintao,
who was the President of China, was going to be at the White House
sometime in the spring of 2006. And I was asked, they didn't want to
give the Chinese a state dinner so they gave them a state lunch
if you can believe that. So I was asked for the state lunch and
I was asked to have dinner or meet with George Bush in
the residence beforehand. When I do that and I'd agreed to do it and then as the time got closer I said I can't
do that, I can't turn down the president. I'm not going to leave Goldman Sachs and
join the administration. So I blew it off at the last minute. >> [LAUGH]
>> And so, I went into the White House for the lunch and everybody was sort
of a little bit cool to me. And as I was walking out with Wendy
it was a beautiful spring day and I was looking at the Treasury Building and I thought back to the days when I
was in the White House as a kid and I'd go over and meet with
George Schultz when he was at Treasury. And sort of a cloud came over my face and Wendy said to me, well I hope you
didn't turn it down for me, sweetie, because if it was really important
to you I would have agreed to do it. And I said no, no, no. And then when they came back the third
time I just realized that it was fear of failure. I realized that I knew I could do
a good job as Treasury Secretary. I couldn't think of many people that had
gone from business to government and come back, left with a higher
reputation than they'd come with. And so as soon as I realized that,
I said, we'll, I'm not going to give into that and
I accepted. And, my family was in shock for awhile. My mother said to me, by gosh,
you started off working for Nixon and you're going to now finish working for
Bush. You should be ashamed of yourself. >> [LAUGH]
>> So, I cried. [LAUGH] Etc, etc. And they all decided as I did
that they had great respect and liked when they saw how he worked with me. And I had great respect for him,
and it was a real pleasure. But so I tell you that in more detail,
do you see how some of these decisions. It's not like I said now I'm
going to go to Goldman Sachs and now be Treasury Secretary. Things just worked out. >> But my mother was not a big
fan of George Bush's vote and this actually makes me feel much better,
and I'm sure it does all of you, about not
having that strong of a plan coming up. So hopefully this will work out well. The next question I want to ask
is You stated several times that the work-life balance is
very important to you. And we are trying one
of the main skills or core skills we're trying to gain is the
ability to influence large institution. Now the cutthroat environment,
100 hour plus work weeks at Goldman Sachs, are to some extent in contradiction
with the work-life balance that you've stated several times that you value. So when you were rising through the ranks
and eventually running the organization, how did you think about managing or
influencing that culture? >> I'll tell you another
story because then, I think it was 1999 after we went public. I had a nephew who was graduating
from Kellogg Business School. So, I was the speaker there and
my speech was on work-life balance. And so, I told the story,
which was absolutely true, that I was in the Chicago
office of Goldman Sachs and I had a three year old and
a one year old and I was working hard, coming home late and my wife Wendy said
to me, Hank, this is unacceptable. And you either are going to come home and take an active part in raising the kids or
you're going to come home some night and the kids are still
going to be here and I'm going to be gone. >> [LAUGH]
>> And so, I went to my boss and I said I really need to
do something differently. I really do and
I was off to a very good start. And so he said, look it,
you do what you need to do. So my office was on the 60th
floor of the Sears Tower, and if you can believe this, I would run
at 4:30 from there to get the 4:42 train from the Chicago Northwestern
to Barrington, Illinois. It got in at 5:25. I was home at quarter of six. I would give the kids dinner. I'd give them a bath and
I'd read the goodnight story. And I'd be reading In the Great Green Room
with the Red Balloon, Goodnight, Moon. I'd be going through this. >> [LAUGH]
>> And so, I do not read with expression and so once Wendy came in,
if you've heard me read a speech, you know it's not a very
pleasant thing to listen to. >> [LAUGH]
>> And so Wendy came in and she says, slow down, read with expression. When I did that the kids both
started crying and said, no, read like a daddy not like a mommy. >> [LAUGH]
>> So, I told that story to
the Kellogg Graduating Class. And just like this, It was the same way, everybody laughed and
particularly the women, they loved it. And the mothers loved it,
and they all liked me. And I walked out and
there was a competitive partner at Salomon Brothers at the time,
named J Ira Harris. And he said, you hypocrite. You're standing up there,
giving that speech and then you just work the living daylights
out of the kids at Goldman Sachs. How can you do this? Where does this come from? And I said well, I would just tell
you what I say to everybody that came to me for advice at Goldman Sachs. I said, you can't ask the firm to tell you how many hours
a week you're going to work. If you're working 50 how about 55,
60 how about 65? You have to learn to say no. You have to plan your own life. And that the people spend so
much time on their career and so little relative time on their family. And you just get out of it,
what you invest in it. And you can't be a grunt. Think people need to be very careful. You need to do things you enjoy and
that you're going to do well. And if the only way you can do well is
working more hours than someone else, you're going to lose out, because there's always going to be
someone else who's going to work more. And so you need to find something and you need to work to have
a life away from the job. And I can tell you this,
I know everybody has said this to you, but I can assure you this is this case,
probably the one thing I've done more than anyone else who has ever run
a Wall Street firm is work with clients. Because I worked from all the way
up in investment banking, and when I ran Goldman Sachs,
I still advised CEOs. And I handled clients,
because I thought that was important. I worked with heads of state,
I advised them. I advised the president of China,
Germany CEOs. I've worked with many, many of them that
have been successful professionally. I've worked with many, many people that
didn't get where they thought they were going to get and retired,
and came to me for advice. And I know of many, many people that
didn't quite get to where they wanted to get with their career, and they're happy. They're happy and they're well-balanced. I don't know anyone that says,
boy, I had a great career and I'm happy because I screwed up my life
outside of my career, my family life. There's no one that feels that way. And I take it to the point
where I encourage people to do things also In the not-for-profit area. When I ran Goldman Sachs,
I chaired the Nature Conservancy. I chaired the Peregrine Fund. I encouraged people to do these things. It makes you better at your career. It's not easy and don't expect
your bosses to take care of it. I think you need to take care of it. You need to get yourself in
a situation where you can balance it. It is really, really important,
really important. And you know, it's tricky. >> We have some class members
who got offers already, so I hope they can pull this off. Good luck. >> [LAUGH] Moving forward to the point
when you became the Secretary of Treasury, you've stated before that you identified
specific risks that the financial system was running,
specific financial industries and you've actually pointed it out to
President Bush well before the crises. One of the core skills we're trying to
gain out of our experience here is how to think and strategize in a preventive
manner to avoid crises. So what did you do between the years of
2006 and 2008 to implement that change? And for example, would it have been
possible to implement something like the Dodd-Frank Act earlier or
maybe in 2006, rather than only implement
it after hell broke loose? >> In 2006, after I became
Treasury Secretary of the President, my first meeting he took
the economic team to Camp David. And I was asked to talk about
entitlements, because that was one of the reasons that I was coming down
was to work on entitlement reform. And I said no,
I'd like to speak about financial crises, because I'd been through one in '94 and
'98 and I saw excesses in the system. Now, I saw nothing like
the one we had coming. And when the President said to me,
what will cause it? I said, I don't know. Afterwards, it'll be clear, people with
20/20 hindsight will say it's obvious and there will always be someone
that says I predicted it, but that person won't predict the next one. Okay, because they're unpredictable
in terms of the timing and the cause. >> If you don't mind me interrupting,
we're of the shelf. The derivatives and credit default swaps
not apparently toxic at that point. >> Yeah, so what I did when I came down. He said, what might cause it? I talked about credit default swaps. I talked about a huge problem I saw, which we were working with Tim Geithner
at the New York Fed to clean up. Where there just, I won't go into it, but there's a very big technical
problem with credit default swaps. I thought the hedge funds, hedge
fund's connectivity to banks, I didn't look at, say, mortgages, I knew there
were some issues with subprime. But the idea that the whole
housing marking would drop. We'd been looking at, I was born in 1946,
and ever since World War II, if you bought a diversified
portfolio of residential mortgages the only risk you had was you
got your money back too soon. Because there was no nationwide
decline of housing prices, it was a commercial mortgage market. And so we didn't see that,
we didn't see the money market. But the advantage of having said that was,
the huge advantage to me, was I had a year to build the relationships
we needed to build before the crisis. We couldn't,
the horse was already out of the barn, there were, the excesses were there. But I had a year where we had something called the President's working
group on financial markets. So then I started working
with Ben Bernanke and Tim Geithner, and
we didn't uncover the problems. We never thought about money markets,
or the tri-party repo market, but we did a lot of work together, and
we built strong relationships. And then most important of all, I had a chance to build a relationship
with George Bush, because, if there's any point I want to
make to you all, it's all about interpersonal relationships,
it's all about working with others. Getting anything done that's
important requires that. I had negotiated quite a deal
when I came to the white house, because I got turned down several
times when I came to Treasury. And so that I could make all
the appointments, regardless of political party, at treasury,
that I'd be their primary spokesman and adviser on domestic and economic issues,
how things would be staffed. But I realized when I got there
that no matter what I negotiated, if it didn't work between me and
the President the whole thing wasn't going to work, and
it would be my fault and not his. And I'd been trained as
an investment banker. I wasn't running a big firm
where people gave orders, I was, I had to get down on my knees and persuade certain partners to stay, most of
them thought they were smarter than I was. I had learned to work with clients, so I could run a firm and advise a principal. So I knew how to do that, and so I had an opportunity to build a very
close relationship with the President, a relationship of trust before
the crisis hit, and with Congress. So that was a key, and that was one of the benefits of getting
ready, but we certainly didn't. If I had been omniscient, and
I'd known exactly what was happening, I couldn't have got
the powers a day earlier. Because I started working in Fannie and
Freddie in 2006. It just it took a crisis to get
what we needed from Congress. >> TARP was labeled as as
the bailout of the guilty rich, at the expense of taxpayer money. So that was a very tough decision for
you to make, of course. But how did you think
about public messaging? Did you try to gain support, or
at least understanding of the necessity of the decision by the public,
and how did that go? >> So it's a very interesting thing. When I left Treasury,
there was a poll that showed, and I don't remember the numbers
exactly right, but something like 90% of the people
were against TARP, and 60% or 70% were against torture. And yet, a big part of
the population was also scared to death we were going to
have a financial crisis. So I was never successful, that was one
of the big failings of letting people know what we did was for
the American people. It wasn't for Wall Street, and I think most people to this day still
don't know that all the money we put in that, when I left the programs
accounted for 95% of their programs, the programs accounted for 90% of
the TARP dollars that were in place and 75% of the dollars were
already out the door. And the money we put into banks and
insurance companies all came back, plus just about $50 billion. And it prevented a disaster,
but you don't get credit for a disaster that people don't see. When we went in and asked for the TARP, and painted the picture of
the economy was turning way down. It was going to get much worse a number
of months out no matter what we did. Barney Frank said to me, Barney Frank was chairman of the House
Financial Services Committee, he said, Hank this is going to be very difficult
because you can't prove a counterfactual. And that was at midnight, and
I said what's a counterfactual? And he said,
well you're not going to get credit for, you know people are going to be very angry
because they're going to be hurting, and you're not going to get credit for
saving a disaster they didn't see. But the biggest thing we did
with TARP that was unpopular, was people wanted to punish the banks, and they wanted us to be tougher on the banks. And we did something with TARP that
was never been done before, was extraordinarily innovative, and I don't
think people to this day understand it. Which is when we switched,
which is another story, when I went to congress and said we're not
going to put capital in the banks. We are going to buy a liquid assets. And the reason I did that was, only time
I'd ever seen capital go in the banks, had been when they were nationalized. So bank is ready to fail, you nationalize
them, you're very tough on them, right? That's what you do with. That's we did with Fannie and Freddie. That's what the Europeans did,
you know, the British, they only put capital in two banks. They nationalized,
the Europeans, a handful. So I thought we needed to
recapitalize the system. And I had a theory about
buying liquid assets. But I told Barney Frank,
we need the authority to put capital in, because I thought we might
have to nationalize a few. So, when we got the, but the two weeks we were up in Congress,
the world seemed to change. Wachovia went down, Wamu went down,
the Europeans had to bail out their banks. So I went to George Bush, and I would say you're in a crisis,
you're dealing with big, ugly problems, there are not going to
be elegant, perfect solutions. So you gotta make decisions, and if you're
wrong, you gotta be willing to change. So I went and I said, guess what, it's not
going to work, buy your liquid assets. We have to put capital in banks. And he said, well, how are you going to
explain that to the whole world? I said, I don't know,
I'll just say, we made a mistake, we're going to put capital in the banks. And he said, good, do what you're
going to do to save the The economy. So, but then what we did was
we made attractive terms. Because we wanted to
recapitalize the banking system, and we put capital in 700 banks. So I chose stability over doing
what would be politically popular. >> And what about the misconceptions or the personal misconceptions when it came
to exaggerated bonuses, golden parachutes? Why not put something in place that
makes it very clear to the people that individuals within those
institutions are not benefiting? >> You're right, that of all the things,
well first of all, if we'd done that, if we had put all those conditions on, we
could have easily put those conditions on. And we did more than that when you
look at AIG or Fannie and Freddie. But if I'd done that,
then every bank is the tallest midget. They don't need capital
until they're ready to fail. And you just would have had
a number of serial failures. So what we did,
we put in a number of provisions, and we put in a provision on parachutes,
okay, but not bonuses. If we said we're going to determine how
you pay people, then many banks would say, well we're not going to fail. But we recapitalized the banking system. So it was very unpopular, but
look at where we are relative to Europe. The governments are bailing out the banks
which is bailing out the government and so on. Our banks were recapitalized. And that put everything in
place that was needed for the stress test and for
recapitalizing the banking system. But you're totally right. And of all the things that bothered me,
and I thought was egregious, I just thought it
was so beyond the pale, was those bonuses. Because after the fact, bankers didn't
have to say we've done anything wrong. They just have to say,
thank you to the United States of America. What was done saved the system,
even if our bank might not have gone down, which they all might have said. And so we are going to show
some self awareness and sense of decency and so on. So I sat there dying watching the bonuses,
but there weren't requirements and
I would do the same thing all over again. I tell you that's why we recovered so
quickly and why it worked, and the capital came back,
but people are angry. >> Thank you very much for that. You've been very accomplished. You've actually accomplished more than any
of us could wish to on several fronts. And after all of that, you decided to dedicate the rest of your
life to the work at the Paulson Institute. So what is it about the US-China
future collaboration that you place so much value on, and
are there any specific opportunities or sectors that you think we
should keep an eye on? >> Well, I would say this, first of all,
as I look around here at you all. Because you're here, we're all similar. We all want to make a difference, right? We all want to have a rich personal life. We want to do something professionally
where we make a difference. And my theory is always you need to say,
in today's world where there's so many talented people,
where do I have a comparative advantage? Where do I have the greatest chance
to make a difference where there's an intersection of something that I can
do well, and something that I enjoy? Okay, so two things happened
over the course of my career. One of them was serendipitously,
I got to Asia. I got there at the right time,
I met the Chinese leaders and I was there. And I would just say if you're interested,
my Chinese version of my book came out. Dealing with China,
which is the book I wrote. I wrote the first one on the crisis
was On the Brink, Dealing with China. The first third of the book is
about investment banking in China bringing how capital markets transactions
brought western know-how and capital, that the leaders used to
open up the country to competition. And so I was there. It really revived my career. I would've left Goldman Sachs. I was interested in maybe
doing some other things, and I worked on the first big public
offering for China Mobile privatization, then PetroChina,
then the first bank deal, Bank of China. So I worked alongside of people that
if you were to name the people, the guy who runs the Central Bank,
the Minister of Finance Lou Jiwei, Zhou Xiaochuan, the Central Bank,
Wang Qishan who now runs a big interdisciplinary committee
and who's on the standing committee. I worked with these people. President Xi Jinping, when I set up
the strategic economic dialogue, which I did as treasury secretary with
China, I've actually visited him in Hangzhou before I went to see the others,
the leaders in Beijing. And so I helped him plan, when Xi Jinping
visited the West Coast last September, he asked me to get together a group of
CEOs to moderate a discussion with him. So I know these people, so
I said I can make a difference there. And I always cared about conservation. Jim Morgan and
I worked on the Asia-Pacific Council of the Nature Conservancy, so my wife got
me involved in the Nature Conservancy. I worked in saving parks,
setting up parks in Hunan in China. So I've always cared about conservation. I've cared about the environment. And so if you care about the global
ecosystem, if you think climate change is the biggest economic
risk by far we face in the world, and you want to do something about it,
guess what? China's the place to be, because if they don't make progress
nothing else we do makes much difference. And so I basically said, I care about the
environment, I care about conservation. I've made enough money. I don't need to make more money,
I'm going to do an NGO. So I set up the Paulson Institute. And also, the Nature Conservancy asked me
to do for them what I've done in China, which I set up the Latin American Council
of the Nature Conservancy. So I got back from China on Saturday and
on the 9th, I'm going to Oaxaca, Mexico where we're going to have our
meeting with the Nature Conservancy. And so
I work with business because in China, I have a US-China CEO consul
on sustainable urbanization. So I go there with people like Tim Cook
from Apple and Doug MacMillon from Walmart and Ginny Rometty from IBM and
Mary Barrow from General Motors and we work with Jack Ma, Alibaba,
the State Grid construction companies. So we're doing the things that I
know how to do and I like to do. And I must like work, because I'm no
longer on a private plane going there, I'm on United Airlines, and-
>> [LAUGH] >> Thank you very much for that. >> And I mean I can do this, I'd love to do this for hours but
we're unfortunately out of time. So, one final question
before we move to Q&A. You and Wendy have been married for
just under 50 years. Myself and Donna, who's here with
us today, have been married for just under two months. >> [LAUGH]
>> So, [LAUGH] do you have any advice for us? [LAUGH]
>> Well, I would say people always make jokes and
so on about this, but to me it's serious. And I think the key thing is, [COUGH] we got married when we were young,
and we grew together, and
we kept common interest. I've seen so many couples,
they get married and they grow apart. And so we've done all of our
conservation work together. We've done so much jointly,
she's helped me immensely in China. Many of our most important relationships
were ones that we both built. We were in, last Thursday,
it's the two of us, I was asking her,
please stay an extra day. Because we're going to have dinner
with Premiere Li Keqiang and his wife, Cheng Hong, and
she speaks beautiful English. She studied American nature writing, literature study, the transcendentalists,
Thoreau and Emerson. And so Wendy was there,
we had a workshop on wetlands conservation, and
Wendy was there doing that with me. So I think that the key is, you need to
find things that you can do together. Everybody talks about me as
being a bird watcher, okay? I like being outdoors, I really don't
like bird watching as much as Wendy does. >> [LAUGH]
>> But I do it because I've got bad eyes, I don't see them as well, but
I do it because I enjoy it and I'm doing it with her, and
so we find those things. And then the other thing I really
find that is terribly important is, when there are differences,
to talk about them and learn, the most important thing you
can learn is to say I'm sorry, even if you think its
the other person's fault. >> [LAUGH]
>> If you learn to say you’re sorry and just really learn to say you’re sorry. So, we would always, every week, no matter what,
no matter how busy I was at Treasury or whatever, we would go for
a long walk or a bike ride. And she tells the story of the time when
we were going for a bike ride at Treasury, when I was so, when my mind was elsewhere. I rode the bike right into a gate and
collapsed on the pavement, so. >> [LAUGH]
>> But these relationships you get out of, I will just say this to you. There is nothing, there's not a perfect
job, there's nothing that's perfect. There's, I've got as close to perfect
wife as you can have but nothing, no marriage,
anything is going to be perfect. You get out of it what you put into it,
and so you need to keep investing. And if you don't continue to invest in
your marriage, no matter how much you're in love now 10, 15, or
20 years from now you'll grow apart. So you just, it's just like anything else,
if you value it you will keep it. >> Well I'm sorry, and
[LAUGH] we'll move on to Q and A now. So when you're asking the question
please stand up and state your name. >> I wanted to ask what do you think
of the financial technology sector? And how do you think
that's going to evolve and change the relationship between banks and
consumers? >> What do you think of the evolution
of the financial technology center? And how do you think this will effect
the relationship between the banks and the consumer? >> The evolution of what? >> The financial technology sector. >> The financial technology sector,
Fintech okay? >> Fintech. [LAUGH]
>> Sorry about that. >> Okay, because I tell you, it's amazing what's going on and the time, and you look at what's going on in China,
with Alipay and so on. So it's extraordinary, and it is in China in particular,
where you don't have all the financial infrastructure
that we've got in other countries. It is growing, very, very quickly,
I think it's exciting. I think a paperless, if we ever get
to a paperless financial system, it will make a big difference
in terms of transparency and all kinds of other things
in terms of taxes. And I think the thing we
need to be careful about is, I learned and one of the lessons
from the financial crisis is, you can sometimes have too
much complexity or innovation. And one of the things that happened
before the financial crisis, is our financial system
outgrew our regulatory system. And so I do worry about regulation, transparency in places, and
I watch the money market funds. The scariest thing for me, and
the closest I could see to the financial crisis bleeding over from Wall Street to
Main Street was when we had three and a half or four trillion dollars worth
of money market funds imploding. And they're the ones that were
funding the commercial paper. So I was hearing from AAA companies saying
we can't sell our commercial paper, and we're not going to be able to even
make our quarterly dividend payment. And I could realize if they start paying
their suppliers, then it goes, it just goes, pretty soon it hits small industrial
companies and the whole system collapses. And so I think to make sure that this, what I call fintech doesn't grow so quickly, that it's unregulated. And we needed to make sure that
there's the right protections and the right liquidity, and so on. >> So if there's an app that controls your
entire portfolio at the click of a button, how would that affect
Goldman's Private Wealth Management Team? >> [LAUGH] I'll tell you, for a long time, I remember, and this'll date me. So you all were in primary school, but when we had the telecom
internet bubble burst, when I was at Goldman Sachs in about 2000. And the years running up to that
everybody was saying, well, how's the internet going to
change our business model? How's it going to
disintermediate what we do? And I remember then we tried
to set up a technology platform for a high net worth force. And I continue to believe that there are going to be a good number
of people that are going to want real Advice and real judgment and
customized, but there's a lot that needs to be done and can be
done more efficiently through technology. So, but that's the story,
the concern and what you all are going to deal with, we're dealing
with right now, is going to be a big, big factor in your business lifetimes
is the dark side of technology. It makes all of our lives better, we're
not going to turn back the clock, but I will tell you, when you look
at automation and technology and what's doing the labor markets, and
the number of people that are going to be. Anything that can be automated or
routinized, will be. So that's, what you're going to see is people at
the top are going to do very well. And there's going to be a lot
of people without jobs or without the jobs they want. And how we come up with a political system
that lets our democracy work and lets our economy continue to flourish, is going to
take a lot of interesting thought. And there's nothing you
need to be afraid of but that's another reason why it
comes back to my advice to you. You can afford anything other than not,
you need to keep learning and growing in any job you get and
get something that plays to your skill. It's going to take judgement and
take wisdom and they can't be, you're not going to be
disintermediated by technology. >> I think we have time for
one more question. >> Peter Stradling, thank you for
coming to talk to us. So I was just thinking about, given
the immediate reporting on the crisis in the book Too Big to Fail and the narrative
that both those things cultivated. Is there anything about this prevailing
narrative that you feel is fundamentally misunderstood or
you would want the public to know? You mentioned TARP and it's
implementation but are there other things? >> I would say that I think Too Big
to Fail got it largely right. If you want to read the narrative that got
it totally right, you'd read On the Brink, because that was a first hand account, and no one has been able to quarrel with
any fact in the book the way it's written. But I would say that the other thing
that people ask about all the time. When they say if you made major mistakes
and I say, well I think the major ones, we made a lot of mistakes, but the major ones
we corrected right on the battlefield. So, putting, reversing ourselves, putting
capital in the banks, or with Fanny or Freddie, I remember I said, if we had
unlimited authorities or unspecified I wouldn't have to take the bazooka out,
and I took it out when I had to. But, I would say, we still have
a surprising number of people, that despite the fact that Bernanke,
Geithner, and I are all generally regarded to be straight shooters, don't believe
us when they say, we didn't have any authority, legal authority,
that would have worked to save Lehman. And the fact is, but no one can tell
us what that authority was we had. Because, we couldn't,
we had no authority to, guaranteed debt, or to put in capital. And, what we learned when
Bear Stearns was going down, was a fed loan didn't work when
a bank was, frankly, unravelling. Everybody pulls their money and run,
and so we were fortunate enough to have a buyer there, JP Morgan and
it guaranteed the trading book. And so when Lehman went,
we had AIG, Lehman, and Merrill all going at the same time. And frankly, it was terrible but we got
the best possible outcome because if Lehman had been bought, then they
wouldn't have been anyone to buy Merrill. And Merrill was bigger and
they were going down immediately. And with AIG,
we lucked out because the perception with all us was there's this big
liquidity crisis at the holding company. Which was like a big hedge fund and the
underlying insurance companies which had individual credit ratings were money good. So the treasury could loan against
those and the market accepted it. But by the time the market figured out,
guess what, that wasn't the case, we now had
the tarp and we could put capital in. But at the end of the day, I realized that I've given up trying to explain
that because unless you were close to it you're not going to really
understand it that well anyway. And the fact is, bailouts shouldn't be,
the whole thing was unpopular, and I don't think bailouts should
ever be popular in the United States. And when people screw up,
if they take a risk and they succeed they should be rewarded and
if they fail they should fail. But the financial system is such that
if it goes under everybody pays. The only other thing, which I think
I wish people know and understood and I think this is quite important. Is that when there's a financial crisis
everybody always blames the banks. >From the beginning of times
banks get 100% of the blame. And banks make all kinds of mistakes and
so some good comes out of that. But the root cause of a financial
crisis is never the banks. Don't let anybody tell you it is,
it is flawed government policies, and I don't care what the political system is. Whenever you've got a big economy and you've got a banking system,
there'll be flawed government policies. They lead to excesses, excesses manifest
themselves in the banking system and there'll be failures. So the best you can hope for is to get to it before the excesses become
too great and have the tools you need. And so the Fintech question, the thing I'd be asking myself
all the time about Fintech, is everybody now is
focused on the big banks. But I think the problem is that
if you regulate them so much and turn them into utilities you
force the risk out elsewhere. And a lot of the risk was in
the tri-party repo system, was in the shadow banking market,
money markets and so on. And the basic risk comes in our financial
system because whatever the size is, I forgot what number is, 13, $14 trillion
or whatever, 60% of that is deposits. Okay, the rest is wholesale funding and
so you're always going to have risk. And so the problem is if you
just only blame the banks you get to this,
it's going really far in the US, but then you don't focus on
cleaning up the basic problems. What leads us to borrow too much,
save too little, okay, why don't we get around to fixing Fanny or
Freddy? If we have a vocal rule and
banks can't do market making and you got liquidity problems and you've got
interest rates that are almost zero and money is seeking out yield. You're going to have bubbles and what
about the bond funds and liquidity there? There's so again I'd say don't
just focus on the banks and don't ever believe that the banks
are the only problem because that'll just cause you to beat up on the banks and
we won't deal with the root causes. >> Thank you very much for
your time Mr Secretary. >> Okay, thank you, thank you. >> [APPLAUSE] [MUSIC]
