CNBC TRANSCRIPT: CNBC'S MARIA BARTIROMO INTERVIEWS U.S. TREASURY SECRETARY HANK PAULSON ON "CLOSING BELL" TODAY AT 4PM

WHEN: Today, Tuesday, Dec. 16th at 4PM ET

WHERE: CNBC's "CLOSING BELL"

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

All references must be sourced to CNBC.

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MARIA BARTIROMO: LET ME GET YOUR REACTION TO WHAT THE FED DID TODAY ESTABLISHING THIS NEW TARGET RANGE FOR THE FED FUND RATES OF 0 TO .25%.

HANK PAULSON: WELL, I NEVER GOT THE COMMENT ON MONETARY POLICY BUT I WILL ADD TO WHAT STEVE [Liesman] SAID, WHICH IS, I THINK WE ARE ALL VERY FORTUNATE THAT WE HAVE A FEDERAL RESERVE THAT'S WILLING TO DO WHAT'S NECESSARY TO HELP US GET THROUGH SOME VERY CHALLENGING AND HISTORIC TIMES HERE.

BARTIROMO: LET ME GET YOUR THOUGHTS ON THE AUTO. WE KNOW THAT THE ECONOMY HAS DETERIORATED SINCE THE LAST FED MEETING IN OCTOBER. AND NOW WE HAVE THIS SENSE OF THIS URGENCY TO GIVE THEM AID AND DISTRIBUTION OF MONEY IN DAYS, NOT WEEKS. WHAT'S STOPPING FROM YOU GIVING THE AUTOS $14 BILLION FROM THE T.A.R.P.?

PAULSON: WELL, WE ARE WORKING ON IT. AND WE'RE GETTING THE INFORMATION AND WE'RE VERY FOCUSED AND WE NEED TO DO THIS. BUT WE NEED TO DO IT RIGHT.

BARTIROMO: WHAT ARE THE ODDS THAT THESE COMPANIES COME BACK TWO, THREE MONTHS NEEDING MORE MONEY? THEY WILL COME BACK TO TIM GEITHNER IN OR WHOMEVER AT THE FED, THAT THEY NEED MORE MONEY.

PAULSON: WELL REMEMBER MARIA, IT IS IMPLICIT IN WHAT YOU SAID. WE HAD FAILED THE CONGRESSIONAL LEGISLATION, WHAT WE CAN DO WITH THE T.A.R.P., IF WE DO IT, IS - IT IS A BRIDGE AND IT WILL BE TEMPORARY. BUT IT NEEDS TO HAVE A PATH - IT NEEDS TO PROTECT THE TAXPAYER AND IT NEEDS TO HAVE A PATH TO VIABILITY. AND SO - I THINK THE MOST ANY OF US CAN DO IS BE HELPING TO PUT THESE COMPANIES ON A PATH TO VIABILITY. BUT AGAIN, THE WORK THAT'S GOT TO BE DONE HERE HAS TO BE WORK BY THE AUTO COMPANIES AND ALL OF THEIR STAKEHOLDERS. AND IT'S GOING TO TAKE A LOFT WORK.

BARTIROMO: SO YOU WANT TO SEE A PLAN IN PLACE TO GET THERE.

PAULSON: I'M JUST SAYING FOR THE LONGER TERM, OBVIOUSLY. THAT, YOU KNOW, PEOPLE THROW AROUND VIABILITY. THAT'S A WORD THAT GETS THROWN IN. EVERYBODY IS FOR VIABILITY RIGHT NOW. JUST LIKE EVERYBODY IS FOR TAXPAYER PROTECTION. BUT AS SOMEONE WHO SPENT A LOT OF TIME IN THE MARKETS, I CAN TELL YOU VIABILITY IS CHALLENGING TO ACHIEVE. IT'S NECESSARY TO ACHIEVE. AND IT'S GOING TO HAVE TO BE FINANCIAL VIABILITY AND THE VIABILITY TO BUILD AND SELL THE KIND OF PRODUCT THAT THE MARKET WANTS. COMPETITIVENESS IS SOMETHING THAT GOVERNMENT CAN'T CONFER ON ANYONE. BUT WHAT WE HAVE IS - WE HAVE A NEED RIGHT HERE, THE PRESIDENT HAS SAID THAT - I JUST TOTALLY AGREE WITH HIM. FAILURE BY THESE COMPANIES AT THIS TIME IS NOT SOMETHING ANY OF US WANT TO CONTEMPLATE. SO WE NEED TO MOVE WITH ALL OF THE DELIBERATE SPEED HERE TO ADDRESS A SHORT-TERM SITUATION BUT, AGAIN, HELP PUT THEM ON A PATH WHICH IS NOT GOING TO BE AN EASIER OR SHORT PATH TO VIABILITY.

BARTIROMO: FAILURE MEANS WHAT ON THE IMPACT ON THE ECONOMY? IF THEY WERE TO FAIL WHAT'S YOUR ESTIMATION IN TERMS OF JOB CUTS.

PAULSON: LISTEN, I SEE NO GOOD TO BE SERVED BY ME SPECULATING ABOUT SOMETHING WE DON'T WANT TO SEE HAPPEN. AND I WOULD JUST SIMPLY SAY THAT I HAD DEBATES WITH PEOPLE THAT WOULD ARGUE THE OTHER SIDE. WE COULD ARGUE EITHER SIDE OF THIS. I'M JUST SIMPLY SAYING IN TODAY'S WORLD, I DON'T THINK THIS IS SOMETHING ANY OF US WANT TO FIND OUT. WE DON'T WANT TO HAVE - THE PRESIDENT'S MADE A DECISION THAT A FAILURE HERE, A DISORDERLY FAILURE WOULD NOT BE A GOOD THING.

BARTIROMO: LET ME MOVE ON TO THE BROADER ISSUES. CLEARLY, THE GOVERNMENT HAS PUT EXTRAORDINARY MEASURES IN PLACE, RESPONDING TO AN EXTRAORDINARY MOMENT IN TIME. WHERE ARE WE IN TERMS OF A RECOVERY? WHAT DO YOU THINK SPECIFICALLY NEEDS TO HAPPEN TO FURTHER UNLOCK THESE CREDIT MARKETS?

PAULSON: WELL, MARIA, THAT'S A QUESTION EVERYBODY IS ASKING. I THINK YOU NEED TO FIRST OF ALL, SEE WHAT IS IT WE HAVE DONE. OKAY. WHAT WE'VE DONE TO DATE IS WE STOPPED A STRING OF - WE STEMMED A STRING OR CYCLE OF FINANCIAL INSTITUTIONAL FAILURES WHICH COULD HAVE LED TO A DOWNWARD SPIRAL HERE WHICH WOULD BE VERY, VERY DANGEROUS. A FREEFALL FOR THE ECONOMY. SO WORKING TOWARDS STABILIZATION AND THEN RECOVERY IS THE KEY HERE. AND I DON'T THINK THAT THERE'S ANY SINGLE ACTION THAT WE CAN TAKE THAT'S GOING TO BE A SILVER BULLET AND GET US THROUGH THIS PROBLEM QUICKLY. BUT IT'S JUST GOING TO TAKE A LOT OF WORK, THE KINDS OF THINGS WE HAVE BEEN WORKING ON WITH THE FED TO HELP GET CREDIT FLOWING AGAIN.

BARTIROMO: WHAT CAN YOU TELL ABOUT THE CONSUMER END OF THINGS? WILL THE CONSUMER START TO SEE THE CREDIT LINE CUT?

PAULSON: WELL, THAT IS A CONCERN. AND THAT IS WHY. NOW, WE AT TREASURY FELT SO STRONGLY ABOUT WORKING WITH THE FED AND BACKING THE FED'S PROGRAM TO SUPPORT CONSUMER FINANCE. BECAUSE A LOT OF CONSUMER FINANCE IN THIS COUNTRY TAKES PLACE OUTSIDE OF THE BANKING SYSTEM. IT'S VERY IMPORTANT TO KEEP THAT GOING. AND IF WE DON'T KEEP IT GOING, THE CONSUMER WILL FEEL THE IMPACT.

BARTIROMO: SO THAT'S THE ISSUE PEOPLE ARE WORRIED ABOUT, THE NEXT SHOE TO DROP. AND THERE'S AN ANALYST AT OPPENHEIMER, MEREDITH WHITNEY, WHO SAYS TWO-THIRDS OF CREDIT CARDS LINES ARE CONTROLLED BY FIVE BANKS. ARE YOU CONCERNED THAT THERE'S TOO MUCH OF A CONCENTRATION ON CAPITAL AND THAT THEY WILL ZAP THE CREDIT LINES?

PAULSON: LET ME SAY THIS. RELATIVE TO MANY OTHER PLACES IN THE WORLD, WE HAVE A LOT OF OUR FINANCING THAT TAKES PLACE OUT OF THE BANKING SYSTEM. SO THAT'S PART OF IT. 40% OF CONSUMER FINANCE TAKES PLACE OUT OF THE BANKING SYSTEM. BUT I DO AGREE WITH YOU. IT'S CRITICAL TO HAVE OUR MAJOR BANKS LENDING AND PLAYING THE ROLE WE NEED THEM TO PLAY. THEY CAN BE HOARDING CAPITAL. I KNOW THERE IS A FAIR AMOUNT OF FRUSTRATION WITH THIS. PEOPLE BROADLY THROUGHOUT THE ECONOMY BUT, AGAIN, WHAT I WOULD REMIND THEM IS WE'RE FOCUSED ON THIS, NUMBER ONE. NUMBER TWO, WERE IT NOT FOR THE ACTIONS THAT HAVE BEEN TAKEN TODAY, WERE IT NOT FOR THE ACTIONS IN TERMS OF THE CAPITAL PURCHASE PROGRAM, AND THE FDC'S PROGRAMS, TO HELP THE INTERBANK LENDING, THESE GUARANTEES, LENDING WOULD BE IN MY JUDGMENT MUCH LESS THAN IT IS TODAY.

BARTIROMO: WHY NOT PUT MORE CONCESSIONS IN PLACE TO ENSURE THAT THOSE BANKS ARE NOT HOARDING THE CASH AND THAT THEY ARE LENDING ARE THEY LENDING?

PAULSON: WELL, THEY ARE OBVIOUSLY LENDING. THE QUESTION IS ARE THEY LENDING ENOUGH? AND THE ANSWER FROM EVERYBODY IS NO. I THINK MOST PEOPLE SAY THAT THEY'RE NOT LENDING ENOUGH. MOST PEOPLE SAY THEY'RE LENDING MUCH MORE THAN THEY WOULD HAVE BEEN LENDING IF WE HADN'T DONE THIS. I WOULD JUST SAY THIS. IT'S VERY HARD IF YOU SPENT TIME WITH REGULATORS OR ANYONE ELSE TO GO INTO A BANK AND SAY MAKE THIS LOAN, DON'T MAKE THAT LOAN. WE DON'T WANT TO NATIONALIZE OUR BANKING SYSTEM,

BARTIROMO: THAT'S WHY THEY WANT MORE CONCESSIONS, THEY DON'T WANT TO BE -

PAULSON: LET ME SAY, THE REGULATORS DID SOMETHING, AND WE WERE VERY SUPPORTIVE OF THIS, PUT OUT A VERY STRONG AND EXTRAORDINARY STATEMENT SAYING THAT THEY WANTED THE BANK SUPERVISORS TO MONITOR LENDING, TO MONITOR THE ACTIONS THEY'RE TAKING IN FORECLOSURE MITIGATION. AND A NUMBER OF OTHER ACTIONS. AND I THINK THAT YOU'RE GOING TO SEE US CONTINUE TO DO MORE. EVERYONE DO MORE TO ACTIVELY ENCOURAGE THE BANKS TO LEND MORE. BUT I WILL SAY THIS. DESPITE WHAT WE DO, YOU ARE GOING TO SEE WHEN YOU GO THROUGH A PERIOD LIKE THIS, LENDING IS NATURALLY GOING TO BE LESS THAN PEOPLE WOULD LIKE. THAT'S WHAT HAPPENS. WHEN CREDIT - WHEN THERE IS GREAT CREDIT EROSION AND BANKS ARE UNDER PRESSURE.

BARTIROMO: YOU'VE BEEN DEALING WITH SO MUCH IN YOUR POSITION UNDER YOUR TENURE. WE RECOGNIZE THAT. OF COURSE, NOW THAT EVERYBODY IS FEELING IT, IN TERMS OF JOB CUTS AND UPSET IN THE ECONOMY, EVERYONE IS TRYING TO FIGURE OUT WHO TO SECOND-GUESS. DO YOU REGRET ALLOWING LEHMAN TO FAIL?

PAULSON: WELL, MARIA, AGAIN, I SAID THIS AND IT IS AMAZING THING BECAUSE WHAT I - WHAT I'VE SAID REPEATEDLY AND SAME THING THAT BEN BERNANKE AND TIM GEITHNER SAID, WE DIDN'T HAVE A BUYER FOR LEHMAN BROTHERS AND WE COULDN'T FIND A LAW. IF THERE HAD BEEN ONE OF THE TRANSACTIONS THAT WE ARE HOPEFUL MIGHT HAVE BEEN CONSUMMATED WITH SOME OF THE POTENTIAL BUYERS. THERE WASN'T ANY LAW THAT THE FED HAD THAT WOULD LET THEM LEND AGAINST ASSETS WHEN THERE WAS SUCH A BIG DISCREPANCY BETWEEN THE VALUES THAT THE BUYERS SAW AND THE KINDS OF LOANS THAT THE FED WOULD NEED TO MAKE. SO THIS WAS A CASE - BUT I THINK PART OF THIS AND I'VE ALMOST GIVEN UP TRYING BECAUSE THE FACT IS, WE WERE SO EXTRAORDINARILY SUCCESSFUL IN BEING ABLE DEAL WITH A WHOLE LOT OF THINGS THAT CAME AT US, AND COBBLING TOGETHER AUTHORITIES, GETTING AUTHORITIES FROM CONGRESS, THAT PEOPLE JUST SAY IT IS THE GOVERNMENT. THEY CAN DO WHATEVER THEY WANTED. BUT I WOULD JUST SAY WITH LEHMAN, WE DIDN'T HAVE A BUYER AND WE DIDN'T HAVE A DEAL THAT COULD HAVE BEEN DONE.

BARTIROMO: NOTHING ELSE TREASURY COULD HAVE DONE?

PAULSON: I TELL YOU, WE SHOULDN'T. FIRST OF ALL, TREASURY DIDN'T, UNTIL WE GOT THE T.A.R.P., TREASURY HAD NO LEGAL AUTHORITIES DO ANYTHING. THE ONLY AUTHORITIES WE HAD WAS WHAT WE COULD PERSUADE OTHERS TO DO. AND WE WENT AFTER LEHMAN, WE WENT TO GET THE T.A.R.P. AND I WILL SAY SOMETHING EVEN FURTHER. AFTER BEAR STEARNS, WHERE IT WAS SO CLEAR TO ALL OF US, THAT WHERE WERE REALLY FORTUNATE THAT THERE WAS A BUYER FOR THE WHOLE COMPANY, AND THE ASSETS THAT HAD TO BE LEFT BEHIND, WERE NOT ADVERSELY SELECTED. THE FED COULD MAKE UP THE DIFFERENCE BY LENDING AGAINST THOSE ASSETS AND KNOWING THE INVESTMENT WAS PROTECTED. WE SAID IF THIS HAPPENS AGAIN WITH SOMEONE ELSE THAT'S NOT A BANK, WE DON'T HAVE THE POWERS. WE'VE KNOWN THAT FOR SOME TIME. BEN AND I BOTH GAVE SPEECHES, WE WENT TO CONGRESS. WE TALKED TO EVERYBODY THAT WOULD LISTEN. WE WORKED TO TRY TO AVOID IT. BUT AT THE END OF THE DAY WE DIDN'T HAVE THE POWERS UNTIL WE WENT TO CONGRESS AND GOT THE T.A.R.P.

BARTIROMO: EXTRAORDINARY MOMENT.

PAULSON: AND EVEN WITH THE T.A.R.P., YOU DON'T HAVE WIND DOWN AUTHORITIES. I WAS READING SOME - I FORGOT WHAT IT WAS, IT WAS SOME PERIODICAL LAST WEEK, THERE WAS SOME BANKRUPTCY LAWYER TALKING ABOUT LEHMAN OR - I GUESS IT WAS LEHMAN - SAYING GEE I DIDN'T KNOW WHY THE FED DIDN'T DO MORE TO HAVE THERE BE AN ORDERLY BANKRUPTCY. WELL THE FACT IS THAT'S THE LAW. WITH REGARD TO A BANK, THE FED CAN INTERVENE AND GET IN AND DEAL WITH CONTRACTS IN A WAY THAT PROTECTS THE SYSTEM. IF THERE'S NOT A BANK, JUST GO INTO BANKRUPTCY. AND THAT'S ONE OF THE THINGS THAT BEN AND I HAVE BEEN TALKING ABOUT FOR SOME TIME.

BARTIROMO: THAT'S A VERY IMPORTANT POINT. YOU GOT THE T.A.R.P. WE'RE GOING TO TAKE A SHORT BREAK. WE HAVE MORE WITH HANK PAULSON AFTER THIS SHORT BREAK WE WILL TALK ABOUT WHAT IS LEFT IN THE T.A.R.P. AND WHERE THAT MONEY GOES NEXT.

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BARTIROMO: WE WELCOME YOU BACK TO "THE CLOSING BELL." HANK PAULSON. WE LEFT THE LAST SEGMENT, MR. SECRETARY, TALKING ABOUT THE T.A.R.P. PLAN. TELL ME WHERE THAT STANDS. YOU'VE GOT AN ADDITIONAL $350 BILLION. DO YOU NEED TO TAP IT? HAVE YOU APPROACHED CONGRESS? DO YOU WANT THAT MONEY? WHERE IS IT GOING?

PAULSON: RIGHT NOW, MARIA, GIVEN THE AUTHORITIES AND TOOLS WE HAVE IN THE T.A.R.P. COMBINED WITH THE AUTHORITIES THE FED AND FDIC HAVE, I THINK WE'VE GOT A LOT OF FIREPOWER. AND WE'VE GOT I THINK IF WE SHOWED ANYTHING, WE HAVE SHOWN THAT WE KNOW HOW TO RESPOND QUICKLY TO SITUATIONS THAT COME UP. YOU KNOW, I'M FOCUSED ON IT BUT I THINK WE'VE GOT WHAT WE NEED NOW.

BARTIROMO: WE HAVE SEEN AT LEAST 20 BANKS CERTAINLY IN THE UNITED STATES FAIL IN 2008. HOW MANY MORE BANKS DO YOU EXPECT TO FAIL?

PAULSON: I'M EXPECTING NO OTHER MAJOR FINANCIAL INSTITUTIONS TO FAIL. BECAUSE WITH WHAT YOU SAW HAPPEN AND, FORGETTING THE UNITED STATES, IT WAS AROUND THE WORLD. I MEAN, THERE'S JUST A WAVE OF MAJOR FINANCIAL INSTITUTION FAILURES OR THE EQUIVALENT OF FAILURES. AND THEN YOU SAW THE FINANCE MINISTERS AND CENTRAL BANK GOVERNORS COME TOGETHER. AND WE, YOU KNOW, IN OCTOBER, AND THERE WE LAID OUT THIS STRATEGY AND ONE KEY ELEMENT OF THE STRATEGY WAS TO BE ABLE TO STABILIZE THE SYSTEM BY MAKING SURE THAT THIS SYSTEMICALLY IMPORTANT INSTITUTIONS REMAIN VIABLE.

BARTIROMO: SO YOU ARE NOT EXPECTING ANY MAJOR FINANCIAL INSTITUTIONS TO FAIL. THAT'S GOOD NEWS. I'M HAPPY TO HEAR THAT. LET ME ASK YOU ABOUT AIG. WHY ARE THE TERMS FOR AIG SO DIFFERENT THAN THE TERMS OF CITIGROUP? THIS HAS COME UP A NUMBER OF TIMES IN MY INTERVIEWS. THE GOVERNMENT IS TAKING 79.9% OWNERSHIP OF AIG. 7.9% OF CITIGROUP.

PAULSON: WELL, LET'S TAKE A LOOK. REMEMBER AIG. OKAY. AIG WAS A SITUATION WHERE THEY CAME IN THE DOOR, WITHOUT REALLY A FEDERAL REGULATOR, CAME IN THE DOOR, WITH A FEW DAYS' NOTICE, SAID WE'RE GOING TO BE $14 BILLION SHORT. IT WAS AN ABSOLUTE MESS IN TERMS OF WHAT WAS FOUND IN THERE. FORTUNATELY WHEN WE LOOKED AT THAT, AGAIN, WE DIDN'T HAVE THE T.A.R.P. AT THE TIME. THE FED WAS ABLE TO MAKE A LOAN BECAUSE THEY WERE ABLE TO LOAN AGAINST THE UNDERLYING INSURANCE BUSINESSES. AND SO THAT LOAN WAS PREDICATED UPON BEING ABLE TO LIQUIDATE. SELL OFF THE BUSINESSES TO PAY DOWN THE LOAN. AND SO WHEN YOU LOOK AT THAT AND LOOK AT THE TERMS AND LOOK AT SOMETHING THAT WAS GOING TO BE A LIQUIDATION THAT WAS OUR BEST JUDGMENT OF WHAT MADE SENSE AT THAT TIME. THOSE TERMS WERE ADJUSTED AT THE TIME WHEN IT NEEDED TO BE FURTHER STABILIZED BECAUSE IF WE HAD THE T.A.R.P., WE WOULD HAVE PUT IN PREFERRED INITIALLY. SO WE PUT IN THE PREFERRED. THAT'S A VERY DIFFERENT SITUATION THAN THE CITIBANK SITUATION. AND SO WE THOUGHT THAT THE TERMS MADE SENSE THAT WE PUT IN PLACE FOR CITIBANK, VERY IMPORTANT TO, AGAIN, STABILITY OF THE SYSTEM, BUT TO DO THAT IN A WAY IN WHICH WE CONTINUE TO ENCOURAGE PRIVATE CAPITAL TO COME IN AND SUPPORT THIS INSTITUTION.

BARTIROMO: RIGHT, WHY WOULD PRIVATE CAPITAL GO TO AIG WHEN THE GOVERNMENT OWNS 80% OF IT.

PAULSON: THE REASON, AGAIN, WE WERE SO FAR AWAY AT THAT TIME THAT FROM PRIVATE CAPITAL, AND, AGAIN, THIS WAS A LIQUIDATING STRATEGY.

BARTIROMO: YOU ALSO KEPT THE BOARD OF DIRECTORS IN PLACE AT CITIGROUP. WHY? THIS IS THE SAME GROUP THAT'S BEEN OVERSEEING THE COMPANY ON THE WAY DOWN.

PAULSON: I WOULD SIMPLY SAY CITIGROUP, THEY HAVE A RELATIVELY NEW MANAGEMENT TEAM IN PLACE WHICH THE BOARD HAS PUT IN PLACE. AND THAT MANAGEMENT TEAM HAS HAD A LOT THROWN AT THEM. A LOT NOT OF THEIR MAKING, THAT THEY'VE BEEN DEALING WITH AND DEALING WITH WELL.

BARTIROMO: QUICK QUESTION ON THE COUNTERPARTY RISK. THE FED BOUGHT CDO'S FROM COUNTERPARTIES AT AIG, PAID PAR, SURPRISING SOME PEOPLE WHO SAID THE MARKS HAD TO BE MUCH LOWER THAN THAT. MEANWHILE AIG HAS TO PAY BACK $35 BILLION. IT JUST SEEMS TO BE ZIGZAGGING AROUND. REALLY, IN HOPES OF HELPING THE COUNTERPARTIES PERHAPS IS AFFECTING AIG EVEN MORE NEGATIVELY. DO YOU WORRY ABOUT HOW THIS LOOKS TO PEOPLE ON THE OUTSIDE?

PAULSON: I WOULD SAY THIS. THAT'S ONE PART OF THE FED PROGRAM THAT I AM NOT REALLY ALL AWARE OF THE DETAILS. JUST PLAIN NOT AWARE OF THE DETAILS. BUT WHAT I KNOW THE FED DID WAS, AGAIN, MADE THE ORIGINAL BRIDGE LOAN AND THEN I KNEW THEY DID SOME THINGS THAT IN THEIR JUDGMENT, PUT THEM IN A MUCH BETTER POSITION FROM SECURING THE TAXPAYER. SO WHAT THE FED DID, AND I BELIEVE THIS TO BE THE CASE, I DON'T KNOW THE DETAILS. I BELIEVE WHAT THE FED DID IS A LOT OF PEOPLE HAD WRITTEN THINGS ABOUT ALL - YOU KNOW, YOU CAN'T BELIEVE EVERYTHING YOU READ - THAT I BELIEVE THAT THE FED'S ACTION AFTER WE CAME IN AND PUT PREFERRED IN, WHICH IS, AGAIN, WHAT WE WOULD HAVE DONE IF WE HAD THE T.A.R.P. IN PLACE AT THE TIME AIG FAILED. WHEN WE STABILIZE THIS SITUATION, PART OF THE MONEY WE CAME IN PAID THE FED DOWN. AND THEN THE FED TOOK AND OTHER ACTIONS TO PUT THEMSELVES IN A STRONGER POSITION TO PROTECT THE MARKETS AND TO PROTECT THE TAXPAYER.

BARTIROMO: YOU WERE GETTING READY TO HAND OVER THE BATON TO TIM GEITHNER AS TREASURY SECRETARY. WHAT AN EXTRAORDINARY MOMENT OR REALLY PERIOD YOU HAVE OVERSEEN AS TREASURY SECRETARY. WHAT SHOULD PEOPLE WATCH FOR? WHAT SHOULD PEOPLE BE AWARE OF DURING THIS IMPORTANT TRANSITION?

PAULSON: WELL, FIRST OF ALL, TRANSITION IS ABSOLUTELY CRITICAL. AND, YOU KNOW, THERE'S A LONG TIME BETWEEN THE ELECTION AND JANUARY 20th. AND WE ARE DOING EVERYTHING THAT WE KNOW HOW TO WORK WITH THE TRANSITION TEAM TO, YOU KNOW, REALLY MAKE THEM AWARE OF EVERYTHING THAT'S GOING ON. AND OF COURSE, THE PRESIDENT-ELECT MADE A GREAT DECISION IN TIM GEITHNER.

BECAUSE THERE'S SOMEONE WHO'S BEEN LIVING WITH ALL OF THESE ISSUES DAY TO DAY. AND IS VERY FAMILIAR WITH ALL OF THE PROGRAMS THAT WE HAVE AT, TREASURY RELATED TO THE T.A.R.P. AND THE OTHER ACTIONS WE'VE TAKEN LIKE THE FANNIE AND FREDDIE. AND SOME OF THE LIQUIDITY MEASURES WE HAVE TAKEN. HE WAS RIGHT THERE WITH US. THAT'S WHERE I TAKE GREAT COMFORT THAT THIS IS SOMEONE THAT'S GOT GREAT JUDGMENT AND KNOWLEDGE. AND HE'S THERE. AND THEN I THINK THAT WE ARE TOGETHER GOING TO HAVE TO WORK ON MAKING SURE THAT THERE'S A BROADER GROUP OF PEOPLE THERE THAT, YOU KNOW, UNDER HIM DURING THE TRANSITION, BEFORE AND AFTER THE TRANSITION TO MAKE IT WORK. I THINK WE'LL BE VERY SUCCESSFUL.

BARTIROMO: AS FAR AS THE PLAN THAT YOU FLOATED 4.5% INTEREST RATE ON MORTGAGES, LET ME ASK YOU ABOUT THIS. PEOPLE WONDER IF THAT PLAN HAS ACTUALLY BECOME AN ISSUE, PEOPLE ARE WAITING TO GET A BETTER RATE. NOW THEY ARE NOT TAKING OUT MORTGAGES.

PAULSON: MARIA, LET ME SAY WE DIDN'T FLOAT ANY PLANS. THERE WAS A LEAK ABOUT SOMETHING AND I'M THE SORT OF PERSON THAT'S ALWAYS LOOKING AT NEW IDEAS. BECAUSE I HAVE SAID FROM DAY ONE HERE THAT THE KEY THING TO GETTING THROUGH THIS PERIOD IS HAVING THE DECLINE IN HOUSING PRICES SLOW DOWN. THIS HOUSING CORRECTION. AND IN A BIG PART OF THAT IS GOING TO BE AVAILABILITY AND AFFORDABILITY OF INTEREST. MORTGAGE RATES. AND SO, AGAIN, THAT'S WHY THE FANNIE AND FREDDIE ACTION WAS SO CRITICAL. THAT'S WHY THINGS WE ARE DOING TO BUY THOSE SECURITIES ARE FANNIE AND FREDDIE. THE FED'S ACTION IS HUGE RIGHT AND WE REALLY SUPPORT THAT. AND WE'RE CONTINUING TO LOOK AT AND WE WOULDN'T BE DOING OUR JOBS IF WE DIDN'T LOOK AT OTHER IDEAS TO REDUCE MORTGAGE INTEREST RATES. BUT I DON'T THINK IT IS FAIR TO SAY WE HAVE A PLAN THAT WE FLOATED.

BARTIROMO: THIS IS THE FINAL QUESTION. THE LAST 29 MONTHS OF YOUR TENURE OBVIOUSLY HAS BEEN INCREDIBLE. AS YOU APPROACH TEND OF YOUR TENURE HERE, HOW ARE YOU FEELING? WHAT ARE YOU THINKING ABOUT THESE DAYS?

PAULSON: WHAT I'M THINKING ABOUT IS BEING 100% FOCUSED FOR THE LAST DAYS. BECAUSE I'M NOT AT ALL CONVINCED I'M GOING TO GET ANY EASY DAYS. RIGHT NOW WHAT I'M THINKING ABOUT IS AUTOS. AND WHEN I GET DONE THINKING ABOUT AUTOS, I'M SURE I WILL BE THINKING ABOUT SOMETHING ELSE. AND WHEN I'M NOT THINKING ABOUT THAT, I WILL BE THINKING ABOUT A FIRST RATE TRANSITION. AND ONCE IT IS OVER, THEN I'M GOING TO START ASKING MYSELF HOW I THINK ABOUT THE LAST 29 MONTHS.

BARTIROMO: WILL THE AUTOS WILL GET THE MONEY BY CHRISTMAS?

PAULSON: LISTEN, THE AUTOS WILL GET THE MONEY. AS QUICKLY AS WE CAN PRUDENTLY DO IT.

BARTIROMO: SECRETARY PAULSON GOOD TO HAVE YOU ON THE PROGRAM.





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