CNBC TRANSCRIPT: CNBC'S ERIN BURNETT INTERVIEWS U.S. TREASURY SECRETARY HANK PAULSON ON "STREET SIGNS" TODAY AT 2PM

WHEN: Today, Friday, Nov. 14th at 2PM ET

WHERE: CNBC's "STREET SIGNS"

Following is the unofficial transcript of a CNBC interview with U.S. Treasury Secretary Hank Paulson on CNBC'S "Street Signs" today.

All references must be sourced to CNBC.

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ERIN BURNETT: IN THE MIDST OF THE ECONOMIC CRISIS, HENRY PAULSON IS WITH US HERE. THE MAN AT THE CENTER OF THE EFFORT. WE APPRECIATE YOUR TAKING TIME, SIR, TO COME OVER AND SPEAK WITH US THIS AFTERNOON. I WANTED TO START, IF I COULD, JUST WITH A LITTLE PIECE OF SOUND AND I KNOW YOU CAN HEAR THIS AS WELL.NEEL KASHKARI, WHO IS IN CHARGE OF THE T.A.R.P. WHAT HE ENDURED THIS MORN ON CAPITOL HILL. LET'S LISTEN IN.

(video of Kaskari on the Hill plays)

ERIN BURNETT: SECRETARY YOU HAD A CHANCE TO SPEAK TO NEEL AND GOT A SENSE OF WHAT HE WENT THROUGH THIS MORNING. PERHAPS THE MOST IMPORTANT WAS AT THE END, WHEN HE SAID WE WOULDN'T BE PUTTING MONEY INTO FINANCIAL INSTITUTIONS IF WE THOUGHT THEY WERE GOING TO FAIL.. IS THAT YOUR WAY OF SAYING YOU THINK THERE ARE NO MORE BANKS TO FAIL IN THIS COUNTRY?

HANK PAULSON: NO, I DON'T THINK -- LET ME ADDRESS IT THAT WAY.FIRST OF ALL, THE MAJOR PURPOSE OF THE T.A.R.P. WAS TO STABILIZE THE FINANCIAL SYSTEM. FIRST AND FOREMOST TO PREVENT A COLLAPSE. THAT WAS NUMBER ONE.

BURNETT: AND THAT'S ACCOMPLISHED?

PAULSON: AND THE NUMBER TWO IS TO GET LENDING GOING.I THINK THE SYSTEM HAS BEEN STABILIZED.I THINK IT'S CLEARLY BEEN STABILIZED. I DON'T THINK PEOPLE ARE GOING TO BED AT NIGHT WONDERING WHICH MAJOR FINANCIAL INSTITUTION MIGHT HAVE A PROBLEM.

BURNETT: THAT, THOUGH, IS OBVIOUSLY SEMANTICALLY SAYING YOU KNOW ONE WON'T. DO YOU FEEL CONFIDENT THAT, CAN YOU SAY, THESE BANKS THAT WE PUT MONEY INTO, THESE BIG NINE, WHETHER IT'S CITIGROUP, JPMORGAN, THOSE COMPANIES WON'T FAIL?

PAULSON: I WOULD SAY THIS IS A HEALTHY BANK PROGRAM AND WE'VE STABILIZED THE SYSTEM.AND THERE IS -- AGAIN, THIS WAS A COMPREHENSIVE PLAN THAT THE FDIC HARDENED THE GUARANTEE GOING OUT TO THREE YEARS, MATURITIES, WE'VE DONE THAT, THAT COUPLED WITH THE CAPITAL, COUPLED WITH THE LIQUIDITY PROGRAM, IS MADE -- BY THE FED HAS MADE A BIG DIFFERENCE. I THINK WE STABILIZED THE SYSTEM AND I FEEL VERY COMFORTABLE WITH THAT.

BURNETT: AND WHEN YOU SAY PEOPLE DON'T GO TO BED AT NIGHT WONDERING WHAT FINANCIAL INSTITUTION MAY FAIL, THAT'S YOU. YOU CAN GO BO-TO-BED AT NIGHT BECAUSE YOU'RE NOT WORRIED ABOUT THAT AS YOU WEERE A FEW WEEKS AGO.

PAULSON: I'M SURE NOT.

BURNETT: NOW WHEN WE TALK ABOUT THE T.A.R.P. AND WHAT THE GOALS WERE HERE, NOW A LOT OF US ARE SYMPATHETIC OF THE SITUATION YOU'RE IN. YOU WENT WITH THREE PAGES AND YOU SAID I'M NOT SURE EXACTLY WHAT I NEED TO DO, I NEED THIS MONEY AND I NEED TO FIGURE OUT AND DO SOMETHING QUICKLY. THEY THEN DEMANDED THAT IT GET VERY SPECIFIC AND THEN WHEN YOU HAD TIME TO EVALUATE YOU CHANGED YOUR MIND. WHAT HAPPENED TO MAKE YOU SAY I WANTED TO BUY TOXIC ASSETS AND NOW THAT'S A MINIMAL, IF ANYTHING, PART OF THIS?

PAULSON: RIGHT. HERE'S THE SITUATION. WE WERE ALWAYS FOCUSES ON ONE THING, CAPITAL IN THE BANKS AND ILLIQUID ASSETS IN THE BANKS. SO THE BANKS, THIS WAS A GOOD IDEA WHEN WE WENT TO CONGRESS. IT'S STILL A GOOD IDEA, BUT WE -- WE CHANGED STRATEGY WHEN THE FACTS CHANGED.

BURNETT: WHAT CHANGED EXACTLY?

PAULSON: AGAIN, LET ME EXPLAIN THE STRATEGY.PURCHASING ILLIQUID ASSETS ADDS CAPITAL, PRICE DISCOVERY ENCOURAGES MORE PRIVATE CAPITAL TO COME IN. BUT BY THE TIME THE PROCESS WAS -- WITH CONGRESS WAS COMPLETED IT WAS CLEAR THAT WE WERE FACING A MUCH MORE SEVERE SITUATION THAN WE HAD ENVISIONED EARLY ON. AND WE HAVE THIS LIMITED POOL OF RESOURCES, BIG, BUT LIMITED, $700 BILLION, AND HOW DO WE USE THAT AND GET THE MAXIM IMPACT AND GET A POWERFUL IMPACT AND IT'S BY PUTTING CAPITAL IN. BECAUSE BY PUTTING CAPITAL IN, THIS THEN GIVES THE INSTITUTIONS THE OPPORTUNITY TO CONTINUE SELLING, WRITING DOWN THE ASSETS, AND LENDING. AND SO IT JUST GOES FARTHER BY -- THROUGH PURCHASING CAPITAL.

BURNETT: IT'S INTERESTING, I REMEMBER WATCHING ALL OF THE HEARINGS AND BEN BERNANKE WAS WALKING THROUGH A REVERSE AUCTION TO CONGRESS. THE NUMBER ONE ISSUE ON THE "TODAY" SHOW, ON CAPITOL HILL, ON CNBC WAS, HOW ARE WE GOING TO DECIDE WHAT THE RIGHT PRICE IS. THEN ALL OF A SUDDEN, THINGS DID CHANGE. I WANT TO GET A SENSE OF, DID YOU JUST REALIZE WE CAN'T FIGURE OUT A PRICE?

PAULSON: NO, THAT WAS FAR FROM IT. AGAIN, LET'S REMEMBER, THE FOREST FOR THE TREES, THIS WAS ABOUT THE SYSTEM. SO WE CAME UP THERE, WE DIDN'T SAY WELL WE'D LIKE A LITTLE BIT OF MONEY TO DO WITH HOMEOWNERS, WE WANT TO HELP THE ECONOMY OVERALL.,WE CAME UP THERE AND SAID THE FINANCIAL SYSTEM IS IN SERIOUS JEOPARDY. WE NEED TO ACT QUICK AND WE NEED RESOURCES. AND THE PROGRAM WHICH WE HAD DEVELOPED, AS I SAID, WHICH IS A VERY WORTHWHILE PROGRAM, ONE WAY OF GETTING AT IT IS BUYING ILLIQUID ASSETS. BY THE TIME THIS LEGISLATION PASSED, BY OCTOBER 2nd, THE SITUATION WAS SO SERIOUS, HERE AND AROUND THE WORLD, WE CHANGED STRATEGIES, STARTED WORKING ON A STRATEGY TO PUT IN CAPITAL. OKAY SO WE STARTED WORKING. WE KNEW WE WERE GOING TO NEED TO PUT IN CAPITAL, AND WE STARTED WORKING ON THAT QUICKLY. NOW, AGAIN, AS I'VE SAID, A NUMBER OF TIMES BEFORE, YOU'RE NEVER EVER GOING GET ME TO APOLOGIZE FOR BEING SO PRUDENT IS TO CHANGE A STRATEGY WHEN THE FACTS CHANGE .AND TO DO IT IN A WAY THAT PROTECTS THE TAXPAYER. NOW THEN, AS WE'VE BEEN WORKING AND CONTINUING TO WORK TO GET THIS CAPITAL OUT, CONTINUING TO EVALUATE THE MARKETS, AS TIME HAS GONE ON AND WE CONTINUE TO EVALUATE THE SITUATION, IT HAS BECOME CLEAR, VERY RECENTLY, THAT WE SHOULD NOT PURSUE A MAJOR ILLIQUID ASSET PROGRAM, ALONG WITH THE CAPITAL PROGRAM, BECAUSE WE THINK, AGAIN, THE PRUDENT THING TO DO, THE RIGHT THING TO DO ,GIVEN THE NATURE OF THE SITUATION WE'RE UP AGAINST, IS TO MAKE SURE WE AGAIN SAVE THE RESOURCE SO IT WILL BE AVAILABLE FOR FUTURE CAPITAL PROGRAMS AND TO DEAL WITH ANY POTENTIAL SYSTEMIC EVENT.

BURNETT: THERE ARE A LOT OF PEOPLE WHO APPLAUD, PARTICULARLY, YOUR DECISION TO PUT CAPITAL IN THE BANKS.NOT BECAUSE THEY WANTED YOU TO DO IT IDEOLOGICALLY, BUT BECAUSE YOU DIDN'T WANT TO DO IT, AND YOU WERE VOCAL ABOUT THAT IN THOSE SAME HEARINGS. WHEN THINGS CHANGED YOU WERE ABLE TO SAY,YOU KNOW WHAT I HAVE AN OPEN MIND, I'M GOING TO CHANGE MY MIND. PEOPLE WOULD APPLAUD YOU FOR THAT. BUT YOU KEEP COMING BACK TO THE FACTS CHANGED. WHAT A LOT OF PEOPLE WANT TO KNOW, STILL, AS THEY TRY TO EVALUATE HOW SICK THIS SYSTEM IS, WHAT CHANGE MADE YOU DO SUCH A DRAMATIC TURN?

PAULSON: WELL, AGAIN, WHAT CHANGED WAS WHEN WE SAW THE COMMERCIAL PAPER MARKETS FREEZE UP ALTOGETHER.

BURNETT: COMMERCIAL PAPER WAS CRUCIAL?

PAULSON: SO GOOD MAIN STREET CORPORATIONS WEREN'T ABLE TO RAISE MONEY.HIGHLY RATED COMMERCIAL PAPER ISSUERS WEREN'T. WHEN YOU SAW THE INNER BANK MARKET CHANGE TO THE POINT THAT BANKS WEREN'T WILLING TO DO BUSINESS WITH EACH OTHER AND WE COULD SEE IT WAS GOING TO TAKE A WHILE FOR THE AMERICAN PEOPLE TO SEE HOW THIS WAS GOING TO TRANSLATE INTO JOBS, WHAT IT WAS GOING TO MEAN TO THEIR LIVES AND HOW IT WAS GOING TO THREATEN THEIR RETIREMENT ACCOUNTS. WE SAW THE SEVERITY OF THE PROBLEM AND THEN, AS I -- IT BECAME INCREASE LIG CLEAR TO ME, EUROPEANS KEPT SAYING WE HAVE NO PROBLEM, THEY DIDN'T HAVE ONE UNTIL THEY DID. AND THEY KEPT LOOKING AND SAYING IT'S ALL ABOUT SUBPRIME, AND HOUSING PRICES IN THE U.S. BUT LET ME TELL YOU, WHEN YOU WENT FROM COUNTRY TO COUNTRY AROUND THE WORLD, THIS WASN'T JUST ABOUT SUBPRIME.AND THERE WAS A GLOBAL PROBLEM IN THE FINANCIAL SYSTEM THAT IT WAS IMPORTANT FOR US MOVE TOGETHER AND TAKE POWERFUL ACTION. AND SO AGAIN, THE BUYING ILLIQUID ASSETS, BUYING MORTGAGES WOULD BE A GOOD THING. IF WE HAD THE FIREPOWER, I FELT TO DO THIS TODAY, IF IT WAS PRUDENT TO DO THAT, WE WOULD DO IT. AND WE CONTINUE TO EVALUATE IT UNTIL VERY, VERY RECENTLY.

BURNETT: SO IT WAS AN ISSUE OF FIRE POWER, JUST THAT YOU HAD NO IDEA HOW MUCH MONEY WOULD BE NEEDED?

PAULSON: I'M JUST SIMPLY SAYING I THINK THE $700 BILLION IS THE RIGHT AMOUNT. I'M NOT SAYING WE'RE GOING TO NEED MORE. BUT AS I'VE EVALUATED THE SITUATION, I THINK THE RIGHT WAY TO DO THIS, IS WHAT I SAID THE OTHER DAY.LET'S GET THIS PROGRAM DONE.LET'S GET THE $250 BILLION OUT THE DOOR. LET'S SEE HOW IT'S WORKING. LET'S EVALUATE IT. AND THEN BE PREPARED TO MOVE AHEAD WITH OTHER PROGRAMS AND I THINK IT'S HIGHLY LIKELY THE RIGHT THING TO DO WILL BE, AT SOME TIME IN THE NOT TOO DISTANT FUTURE, TO HAVE ANOTHER CAPITAL PROGRAM.

BURNETT: ANOTHER CAPITAL PROGRAM. I WANT TO MAKE SURE THAT THAT'S WITHIN THE $700 BILLION.

PAULSON: WITHIN THE 700 BILLION. WE'RE WORKING -- WE'RE WORKING WITHIN THE 700. REMEMBER, THAT'S WHAT I SAID, I THAT A I THINK THAT THE FIRST PRIORITY IS TO MAKE THIS WORK AND THEN THE NEXT PRIORITY IS GOING TO BE -- IS GOING TO BE CAPITAL FOR FUTURE PROGRAMS AND KEEPING CAPITAL IN RESERVE IF WE HAVE AN EMERGENCY SITUATION WHICH IS SYSTEMIC. AND THEN WE LAID OUT SOME OTHER PRIORITIES.

BURNETT: HAVE YOU DONE ENOUGH AND THIS IS THE COURT OF PUBLIC OPINION, FOR THE INDIVIDUAL HOMEOWNER? I MEAN I KNOW WHEN YOU ADD UP WHAT THE INDIVIDUAL BANKS HAVE DONE AND WHAT WAS ANNOUNCED THIS WEEK YOU GET SEVERAL MILLION MORTGAGES THAT HAVE AVOIDED FORECLOSURE BECAUSE OF YOUR EFFORT. STILL PEOPLE SAY IT'S NOT ENOUGH. THAT PROBLEM IS GETTING WORSE. IS IT POSSIBLE FOR PUBLIC RELATIONS, THE RIGHT ANYTHING TO DO WOULD BE TAKE SOME OF THE MONEY AND USE IT SPECIFICALLY FOR MORTGAGE RELIEF?

PAULSON: I WAS GOING TO SAY, I WOULD LIKE TO DO MORE. ALL OF US WOULD LIKE TO DO MORE. WE TOOK A BIG STEP VERY RECENTLY IN TERMS OF THESE NEW SERVICER GUIDELINES, WHICH IS GOING TO MAKE A BIG DIFFERENCE, AND WE'RE GOING TO KEEP LOOKING. AND WHAT I'VE SAID IS, WHEN DEALING WITH THE COURT OF PUBLIC OPINION, I WANT TO STAY VERY TRUE TO INTENT WHEN WE WENT TO THE HILL. AND OF COURSE, WHEN WE WENT THERE, THE MAJOR OBJECTIVE WAS THIS STABILITY OF THE FINANCIAL SYSTEM. WE ARE LOOKING THROUGH THE LENS OF THE ILLLIQUID ASSET PURCHASE, BUT IT WAS ALL ABOUT CAPITOL., IT WAS ALL ABOUT ATABILITY, OK? AND THEN WE MADE THE ARGUMENT, WHICH WAS A VERY VALID ARGUMENT, HAD WE OWNED THESE ASSETS, WE WOULD HAVE MORE LEVERAGE. NEEL KASHKARI MADE THE POINT TODAY, THAT WHAT WE'VE DONE WITH THESE NEW SERVICER GUIDELINES, THEY'RE GOING TO TOUCH MORE HOMEOWNERS AND WE'LL HAVE MORE LEVERAGE THAN WE WOULD HAVE HAD IF WE BOUGHT UP -- USED ALL 0F THE T.A.R.P. TO BUY UP ILLIQUID AT ASSETS. BUT I UNDERSTAND THAT VERY IMPORTANT VIEWPOINT AND IT'S VALID. THE OTHER THING THOUGH IS WHEN WE TALKED ABOUT THE T.A.R.P., AS YOU'LL REMEMBER , IT WAS ALL ABOUT INVESTMENT.INVESTMENT, ASSETS, APPRECIATING, SELLING.THEM, THIS WASN'T AN EXPANDITURE

BURNETT: TO MAKE MONEY FOR THE TAXPAYERS .

PAULSON: SO THESE OTHERS -- SO THE BALANCING ACT HERE IS IF WE GO AND PUT DIRECT SUBSIDIES AND SPENDING THROUGH THE T.A.R.P. IT WILL HELP AVOID FORECLOSURES WITH CERTAIN PROGRAMS BUT IT WILL GO AGAINST THE OTHER VERY IMPORTANT MANDATE.SO THAT'S -- THAT IS THE TRADE-OFF THERE.

BURNETT: IF THE BANKS LEN, AND THIS COMES TO BARNEY FRANK MADE THIS POINT, PUT THIS INJECTION IN ANDTHE OTHER CRITICISM IS, THIS CRITICISM'S GETTING LOUDER IN THE GENERAL PRESS, THAT BANKS ARE TAKING MONEY AND HOARDING IT, HOARDING IS THE WORD BEING USED. USING IT FOR ACQUISITIONS, AS IF THAT'S A BAD THING. CAN YOU MAKE THE CASE TO THE COUNTRY, I'M GOING TO TELL IT TO YOU SIMPLE, WHY I GAVE THE MONEY TO BANKS WITHOUT RESTRICTIONS AND NO MATTER WHAT THEY SPEND IT ON, IT'S GOING TO MAKE THE SYSTEM BETTER AND IT DOESN'T HAVE TO BE ON NEW LOANS?

PAULSON: I WOULD SAY THIS, FIRST OF ALL, NUMBER ONE, IT'S VERY IMPORTANT THAT WE STABILIZE THE SYSTEM. THAT WAS THE FIRST PRIORITY. BUT SECONDLY, WHEN YOU'RE GOING THROUGH A PROBLEM LIKE WE'RE GOING THROUGH AND THE FIRST EMPHASIS HAS GOT TO BE ON RECOVERY AND REPAIR, OUR ECONOMY IS FACING SOME REAL CHALLENGES AND AS THE ECONOMY TURNS DOWN, WHAT ALWAYS HAPPENS IS BANKS PULL IN THEIR HORNS, LEND LESS, THE REGULATORS REINFORCE THAT NORMALLY. NOW, WHEN YOU PUT CAPITAL INTO THE BANKS LIKE THIS, IT'S GOING TO - THEY ARE CERTAIN -- IN MY JUDGMENT -- TO LEND MORE THAN THEY WOULD HAVE LENT, OKAY?

BURNETT: MAYBE NOT TO THE FULL AMOUNT BUT MORE THAN --

PAULSON: MAYBE LESS THAN PEOPLE WOULD LIKE BUT MUCH MORE THAN THEY WOULD HAVE ORDINARILY DONE. AND THEN ON TOP OF THAT THE CASE THAT WE'RE MAKING NOT JUST TO THE BANKS THAT RECEIVES CAPITAL BUT EVERY BANK IN THE SYSTEM HAS BENEFITED BY THE COMBINED SET OF ACTIONS, PARTICULARLY THAT FDIC GUARANTEE THAT'S GONE TO ALL OF THE BANKS. AND SO YOU SAW A REGULATORY STATEMENT COME OUT EARLIER THIS WEEK THAT WAS POWERFUL AND VERY UNIQUE. WHEN HAVE YOU EVER HEARD ALL FOUR REGULAR LATERS COME OUT WITH A STATEMENT THAT ADDRESSES NEED FOR PRUDENT LEND, MONITORING COMPENSATION PRACTICES TO MAKE SURE THEY DON'T LEAD TO EXCESSIVE RISK TAKING FORCLOSURE RELIEF, DIVIDEND POLICY? SO I, TOO, BELIEVE, I AGREE WITH BARNEY, IT'S VERY IMPORTANT THAT THE BANKS LEND. AND WE'RE GOING TO BE ENCOURAGING THEM TO LEND BUT THEY HAVE TO LEND IN A PRUDENT MANNER AND THEY WILL DO MORE LENDING THEN THEY WOULD HAVE LENT IF THEY DIDN'T HAVE THIS PROGRAM.

BURNETT: I KNOW THAT YOU WILL BE TALKING TO HIM NEXT WEEK ON CAPITAL THE HILL ALONG WITH BEN BERNANKE. YOU KNOW THE FAMOUS SONGWRITER SAID, "THE NATION TURNS ITS LONELY EYES TO YOU." THE WORLD TURNED ITS LONELY EYES TO YOU. YOU ENDED UP, INADVERTENTLY, YOU NEVER IN A MILLION YEARS WOULD HAVE THOUGHT THIS, BUT YOU WERE THERE, YOU ARE THE PERSON THAT HAS INSTILLED CONFIDENCE.IT'S A SYSTEM THAT RELIES ON TRUST AND CONFIDENCE. IT'S GOT TO BE YOUR JOB TO SAY IKNOW WHAT I'M GOING TO DO. THEN WHEN YOU CHANGE YOUR MIND AND CHANGE IT AGAIN, A LITTLE BIT OF THE CONFIDENCE IS LOST.WHAT ARE YOU GOING TO BE ABLE TO DO IF WHAT YOU'RE DOING RIGHT NOW ABOUT THE INJECTIONS WHAT HAVE IF YOU CHANGE YOUR MIND AGAIN? HOW DO YOU KEEP THE TRUST?

PAULSON: WELL, I WOULD SAY THIS, I THINK THE KEY THING, REMEMBER, WHAT I SAID WAS GIVE ME -- GIVE A BROAD SET OF TOOLS. WE DIDN'T JUST ASK FOR THE AUTHORITY TO BUY ILLIQUID ASSETS. WE GOT A BROAD SET OF TOOLS TO DEAL WITH THE FINANCIAL SYSTEM, OKAY? AND TO DEAL WITH THE STABILITY OF THE FINANCIAL SYSTEM, THE STRENGTH OF THE FINANCIAL SYSTEM. I ALSO SAID I WAS GOING TO DO IT TO PROTECT THE TAXPAYER. AND SO WHAT WE DID WAS , WE MADE A DECISION TO CHANGE STRATEGIES TO CHANGE STRATEGIES AND I'LL NEVER APOLOGIZE FOR THAT. THE FACTS CHANGED. AND THAT'S GOING TO PROTECT THE TAXPAYER TO A MUCH GREATER EXTENT.

BURNETT: SO THEY'LL STILL MAKE MONEY?

PAULSON: YOU'LL MAKE -- IT'S AN EASIER CASE TO MAKE, YOU KNOW HOW IS SOMEONE GOING TO LOSE MONEY PUTTING PREFERRED STOCKS IN BANKS WHERE WE HAVE GIVEN EVERYTHING ELSE WE'VE DONE TO SUPPORT THOSE BANKS, OKAY? SO WE WILL MAKE MONEY.AND THEN WHAT WE'VE DONE IS WE'VE NOW SAID WE'VE CONTINUED EVALUATE ILLIQUID ASSETS. AND SO NOW I'M SAYING TO THE AMERICAN PEOPLE, THE OBJECTIVE IS THE SAME, IT'S ALL. IT'S A;WAYS BEEN ABOUT CAPITAL. ILLIQUID ASSETS ARE STILL AN ISSUE BUT I THINK THE THE PRUDENT THING TO DO IS NOT RUN OUT AND INVEST ALL YOUR MONEY QUICKLY BUYING ILLIQUID ASSETS IF I THINK THERE'S ANOTHER WAY TO GET AT THIS.

BURNETT: A FEW QUESTIONS RELATED TO THIS BUT SEPARATE. AND A LOT OF PEOPLE WANT TO HEAR ANSWERS TO THESE. FIRST, CHINA A NATION YOU KNOW WELL. $600 BILLION STIMULUS PACKAGE. TAHT'S GREAT, THAT'S WHAT YOU WANTED. OF COURSE THE SIDE EFFECT OF THAT IS THEY'RE THE ONES BUYING AMERICAN TREASURIES, FINANCING THE T.A.R.P., THEY'RE THE ONES DOING -- ARE WE ACTUALLY AT RISK OF HAVING OUR COST OF CAPITAL GOUP BECAUSE OTHER COUNTRIES ARE DOING WHAT YOU HOPED THEY WOULD, DO STIMULUS PACKAGES?

PAULSON: CLEARLY ALL OF US ARE AT RISK FOR THE COST OF CAPITOL GOING UP, GIVEN WHAT NEEDS TO BE DONE AROUND THE WORLD. BUT I STILL VERY MUCH APPLAUD WHAT CHINA'S DOING IS REALLY IMPORTANT AND REALLY NECESSARY.AND REMEMBER, I DON'T POINT MY FINGER AT ANY SINGLE COUNTRY FOR ANYTHING BECAUSE WE HAVE, IN MANY WAYS HUMILIATED OURSELVES AS A NATION WITH SOME OF THE PROBLEMS THAT HAVE TAKEN PLACE HERE. BUT I COME BACK, I DO BELIEVE THE UNDERLYING CAUSE WHEN PEOPLE LOOK BACK A LONG TIME FROM NOW AND THINK ABOUT THIS, HAS GOT TO BE THESE HUGE IMBALANCES, NO NATION'S FAULT, YOU KNOW, OIL EXPORTING COMPANIES, ASIA EXPORTERS, U.S. NOT SAVINGS ENOUGH, BUT HUGE IMBALANCES AND THE CAPITOL FLOWS, WHICH WERE JUST INCREASING DRAMATICALLY, RAINING DOWN THROUGH FINANCIAL INSTITUTIONS ALL AROUND THE WORLD. INSTITUTIONS, A LOT OF LIQUIDITY, LOW LEVELS OF INFLATION, CHASING YIELD, MISPRICING RISK.SO ONE OF THE POINTS WE'LL BE MAKING THIS WEEKEND, A LOT OF PROBLEMS THAT WE CAN DIAGNOSE RIGHT NOW, AT THE G-20 , AND GO ABOUT PUTTING A PROCESS IN PLACE TO DEAL WITH THEM. BUT AT THE END OF THE DAY WE'RE GOING TO NEED A BETTER PROCESS TO DEAL WITH IMBALANCES SO THAT WE DON'T DEAL WITH THE SAME PROBLEMS DIFFERENT MANIFESTATIONS OF THESE PROBLEMS YEARS FROM NOW.

BURNETT: I KNOW YOU HAVE MEETINGS. I WANT TO GET THE OTHER MAIN QUESTION OF THE DAY THAT EVERYONE WANTS ANSWERED. THERE'S NO WAY -- YOU'RE GOING TO STAY IN TRANSITION TO HELP THE NEXT TREASURY SECRETARY. MY UNDERSTANDING FROM TALKING TO YOU IS YOU'VE GOT VACATION PLANS JANUARY 21st AND YOU'RE NOT TALKING ABOUT STAYING ON IN A FULL TREASURY SECRETARY ROLE.

PAULSON: I'M WORKING -- GOING TO WORK TO MAKE A SEAMLESS TRANSITION. AND THE TRANSITION TEAM IS ALREADY AT TREASURY. I'VE SPENT TIME WITH THEM. WE'RE GOING TO CONTINUE TO SPEND TIME . I'M LOOKING FORWARD TO THE DAY WHEN MY SUCCESSOR WILL BE NAMED AND WE'LL -- I'M GOING TO WORK IN ANY WAY WE KNOW HOW TO MAKE IT BE A SEAMLESS TRANSITION. AND THAT'S THE OTHER POINT, I WOULD SAY WITH THE T.A.R.P., IS THE KNEW TREASURY SECRETARY COMING IN IS -- THEY'RE GOING TO HAVE HIS OR HER HANDS FULL DEALING WITH JUST UNDERSTANDING SOME OF THE PROGRAMS WE HAVE IN PLACE.THE GSEs AND CONSERVATIVESHIP, THE MONEY MARKET GUARANTEES, THE CAPITAL PURCHASE PLAN, SOME LIQUIDITY PROGRAMS WE HAVE. SO AGAIN, I BELIEVE IN FULL CONSULTATION. WE'LL DO WHAT WE HAVE TO DO, IF IT'S NECESSARY, BUT WE'RE NOT GOING TO STAY AWAKE AT NIGHT LOOKING TO PUT PROGRAMS IN PLACE WE DON'T NEED TO PUT IN PLACE THAT WILL MAKE IT MORE DIFFICULT FOR THE NEXT TEAM .

BURNETT: FINAL QUESTION, THIS HAS GOTTEN MORE CONVERSATION AMONG PEOPLE THAT I SPEAK TO , IS THE ROLE OF GOLDMAN SACHS . YOU'VE SEEN THE STORIES . FIRST IT WAS FUNNY, NOW PEOPLE TAKE IT SERIOUSLY. MAYBE YOUR COUNSEL HAS BEEN TOO FOCUSED ON PEOPLE FROM GOLDMAN SACHS. THERE ARE TOO MANY PEOPLE FROM GOLDMAN SACHS MAKING THESE DECISIONS.HOW DO YOU RESPOND?

PAULSON: WELL, I THINK THE AMERICAN PEOPLE -- WE'VE BEEN IN THE EQUIVALENT OF WAR I HERE IN TERMS OF ECONOMIC WAR. AND I HAVE TRIED TO GET THE VERY BEST TEAM I CAN GET AROUND ME. I'VE REACHED OUT TO PEOPLE FOR A BROAD GROUP OF PEOPLE. A NUMBER OF THE PEOPLE THAT I FOUND, THAT HAVE COME IN, HAVE BEEN WILLING -- I FRANKLY APPLAUD THEM FOR BEING WILLING TO GIVE U -- A NUMBER OF THEM COMING BACK FROM RETIREMENT, COMING BACK, AND WORKING HARD. SO I JUST -- I WANT TO BE JUDGED BY WHAT WE DO AND WHAT THE RESULTS ARE. AND IT'S UP TO ME TO GET THE BEST TEAM OF PEOPLE I CAN TO HELP ME SOLVE SOME OF THESE PROBLEMS.

BURNETT: WELL TREASURY SECRETARY PAULSON, AS A DISCLOSURE, I ALSO WORKED AT GOLDMAN SACHS. I COULDN'T REALLY POINT TO YOU ON THAT ONE. THANK YOU VERY MUCH TREASURY SECRETARY HENRY PAULSON. WE'LL TAKE A BRIEF BREAK. [END OF INTERVIEW]




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