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Real-Time Coverage of Treasury Secretary Henry Paulson at WSJ Deals & Dealmakers Conference

This is CNBC.com's log of U.S. Treasury Secretary Henry Paulson's Keynote Interview with David Wessel at the WSJ Deals & Dealmakers Conference being held in New York on Wednesday, June 27, 2007.

You can also see live video coverage of the entire conference on the CNBC.com Live Events Player.

1:04PM: The event is listed as "Lunch & Keynote Interview" starting at 12:55PM. It appears the participants will eat lunch first, then we'll hear from Paulson. Stay tuned.

1:17PM: We're now hearing that Paulson will start speaking at 1:30 PM ET.

1:30PM: Still eating. Should be any minute now.

1:32PM: Paulson is being introduced by David Wessel.

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1:33PM: Treasury Dept wants to create a regulatory structure for the 21st century.

1:35PM: President's Working Group looked very carefully at hedge funds and found value to the economy but also great challenges. Sees need for increased vigilance on part of all the stakeholders. Putting together two panels: one with leading investors, the second with leading managers. Both groups are being asked to come up with best practices.

1:37PM: I don't see Ben Bernanke or the Federal Reserve as a barrier to changing bank regulation.

1:38PM: The FSA approach used by the British has worked well. I don't see us ever getting to that model. I think we have the most competitive capital markets in the world. This isn't saying how should we become like the FSA, it's about coming up with a framework that will serve us well for many years to come.

1:40PM I'm not satisfied with the pace of change anywhere in the world. I wasn't satisfied with the pace of change at Goldman Sachs. But there are constraints.

1:42PM: There's something wrong with the tax code. The way we tax businesses is overly complex and when you think about competitiveness of the U.S. economy it is a major issue.

1:43PM: There's a lot of focus today on tax rates for private equity and tax funds. I don't think it makes sense to single out one industry. It's not just hedge funds and private equity that organize themselves as partnerships. There are tax advantages for partnerships and it is a good way to promote risk taking.

1:44PM: It does not make sense to single out one industry and make tax policy for just that industry.

1:45PM: When I came to Washington it was clear there was a political climate against tax reform. I'm starting to think much more about the complexity of the corporate tax code because when we look at competitiveness we also need to look at taxes as a big issue for competitiveness.

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1:48PM: Globalization has been a positive force. It's lifted millions of people out of poverty, yet there is a perverse situation with a growing protectionist sentiment with the view that the benefits have not been distributed evenly.

1:49PM: My emphasis is going to be on how do you get the lower income up. A lot of that is going to be education and training.

1:50PM: Don't know the answer but something can and should be done.

1:50PM: I think taxes should be "low, fair and simple."

1:51PM: The Bush tax cuts don't have anything to do with what's happening with income distribution. The tax cuts have helped the middle class.

1:52PM: Q. Is this an inflection point in the markets? A. I look at the fundamentals. I've never seen a stronger global economy. Developing countries are growing at twice the rate of industrial nations. japan now has sustainable growth. There is great liquidity around the world. You're always going to have some volatility in the markets. Interest rates are still low in historical terms. The volatility can be positive, a wake-up call, which can address some of the excesses we're seeing such as the lack of covenants in some loans.

1:54pm: This is an economy we can all feel comfortable with. You're always going to have excesses in some markets.

1:55PM: Q.How could sub-prime problems have been avoided. A. We need to learn from some of the practices and the mistakes. Plenty of mistakes were made but we need to learn from them and not throw out the baby with the bathwater. let's not forget that many people were able to buy homes with the credit that was provided to them.

1:56PM: Sub-prime is very similar to some other things when you have lots of liquidity and lenders reach for yield and take undue risks.

1:57PM: The financial system is healthy and liquid. I can't think of a time when you look at banks and see so few bad loans.

1:58PM: Paulson now taking questions from the audience.

1:58PM: On global warming: obviosuly a very significant issue and one I've spent a lot of time on. I've been working with China on it. Important to get an international solution. For China, that means getting them low-carbon technology.

2:00PM: The challenge is coming up with the right way to price carbon in developing countries to encourage technological innovation.

2:01PM: Need a "global construct" on global warming. Kyoto was flawed from the beginning. The only way to solve this is over a long period of time with major breakthroughs in technology and engaging the whole world.

2:02PM: We have in China the fastest growing economy and it's the fastest market for the U.S. Some see that as a problem. I see it as an opportunity. Our goal is to improve the standard of living for the average working American. Because we have this concern with income disparity, we may do things that are counterprotective. We shouldn't be afraid of competition. We should be open to competition. It's frustrating to me to hear people say we're going to lose out to China and India. We're in a much better position that they are.

2:05PM: Q. What have you learned in your year in government? A. The key to being suucessful in government is the same as being successful at Goldman Sachs. It's learning how to work as a team with people. You can have the best ideas in the world but if you can't get them done they're not worth anything. I've been "pleasantly surprised" by how many smart people there are in government who work very hard. They stay up all night working on projects. And they're not doing it to get a bonus. They work because they want to do good. I've also learned you better be patient if you want to be effective.

2:07PM The event has ended.