Paulson Warns Of "Fragile" Economy

Treasury Secretary Talks To Scott Pelley About The Controversial $700 Billion Bailout

CBS All Access
This video is available on CBS All Access
Congress is working on the controversial $700 billion bailout of the national economy. A lot of Americans are angry about it, but Henry Paulson, the secretary of the Treasury, says an extraordinary emergency demands action that was once unthinkable. Paulson has helped to nationalize two mortgage giants, seize the nation's largest insurance company, manage the biggest bank failure in U.S. history, and oversee the end of Wall Street as we know it.

Who is Henry Paulson? 60 Minutes shadowed him these past two weeks as he worked to convince the Congress that it should give him perhaps more power than any Treasury secretary has ever had.

"What if the plan doesn't work, what if 700 billion doesn't do it?" correspondent Scott Pelley asked Sec. Paulson.

"Scott, it's gotta do it and we're going to make this work, and we're going to do what it takes to work," Paulson replied.

"Shouldn't the price of failure be failure on Wall Street?" Pelley asked.

"And failure and the market discipline that goes with it is the right thing, but unfortunately we have a system that is way out of whack, where our institutions are too big to fail. We don't have the regulatory authorities and structure in place to protect the American people," the secretary said.

"You can't be proud of Wall Street," Pelley remarked.

"I'm not proud of a lot of things. You know, as I go around the world right now, representing the United States of America, it's a humbling experience," Paulson replied.

Paulson's office in the Treasury building overlooks the White House next door, but the view that has seized his attention is behind his desk: four market monitors that have signaled one emergency after another.

"What was the most difficult moment, what was the moment that put a knot in your stomach?" Pelley asked.

"Scott, I've had a lot of knots in my stomach, but I would say last Wednesday night, when the capital markets froze, when there started to be a run on money markets, banks stopped lending to each other. And, I know people in America won't understand what that means, but if money doesn't flow freely between financial institutions, then it impacts everyone in the country," Paulson explained.

"The economy had a heart attack in that moment," Pelley remarked.

"I would say this: whether it had a heart attack or not, the arteries were clogged," Paulson said.

That was Wednesday, Sept. 17, and Paulson told 60 Minutes that was the night he realized the collapse of Wall Street needed a sweeping intervention.

How much jeopardy is the economy in?

"It's a fragile situation, a very fragile situation. There were times, a couple days, last week, and a day this week, when U.S. Treasury bills were trading for well under one percent," Paulson told Pelley.

"People were buying Treasury bills knowing that they would get almost no return. But it was a safe place to stuff their money," Pelley said.

"It is, in some ways, the equivalent of sticking money in your mattress," Paulson said.