Fmr. Teasury Secretary Paulson Pinched Himself on Fannie Profits; Discusses Economy
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Former Treasury Secretary Hank Paulson was giddy when he found out that Fannie Mae (OTCBB: FNMA) turned a profit in its latest quarter.
Speaking with Judy Woodruff on Bloomberg TV on Thursday, Paulson commented, "Well, I read the Wall Street Journal and the Washington Post today, and I had to pinch myself. I could hardly believe what I was reading." He noted that Fannie and Freddie should still undergo some sort of reform with the U.S. government guaranteeing 90 percent of the mortgages. If the government keeps at it and markets aren't allowed to work, Paulson thinks we'll be right back to 2007 - 2008 all over again.
On the U.S. economy, Paulson feels better, but is still exercising a bit of caution. He said, "I see business investment picking up. You know, housing is starting to recover. The consumer is back a bit. And so I - I'm cautiously optimistic about growth this year. I think we could see growth around 3 percent, 200,000 jobs a month."
Paulson thinks entitlement cuts could be made via "means testing." He would be okay receiving the same Medicare benefits as those struggling to make ends meet. There could also be an extension to retirement for those currently under 50, he commented, and continuous postponement of entitlement reform is a big mistake.
On Fed chairman Ben Bernanke, Paulson said, "I've, first of all, got great confidence in Ben Bernanke, number one. Number two, he's been forced to do some pretty dramatic things to restore our economy, because there's been a lot of inaction in the executive branch and in Congress. Now, what the Fed has done has kept interest rates at an artificially low level. And this has given us a grace period to deal with our fiscal problems, but if you stop and think about it, with 10-year Treasuries yielding about 2 percent in the 1990s, the average was well over 5 percent. And if you take a look and project what is going to happen, in terms of the interest on our debt, when rates go up to a more normal level, that's another reason why I think we need to move pretty quickly and deal with the deficit."
Finally, he thinks the Obama administration is doing well when it comes to handling the financial sector and the economy. He said that Tim Geithner was a key member of the team, "putting in these reforms in place, working with him closely. So President Obama selected him. And then what they did - and I think it was very courageous on Obama's part because there was all these bailouts, these rescues were so unpopular - but Tim persuaded him to stick with the capital markets stabilization programs we had put in place. And then they adapted those very well...to meet the changing situation and managed them very well. And so...there was complete continuity. I think the programs were largely in place when Obama came in the office. I think there could have been...real temptation to go in different direction, to nationalize the banks, et cetera."
NOTE: Fannie Mae reported $17.2 billion in net income for FY12 and $7.6 billion in Q412.
Speaking with Judy Woodruff on Bloomberg TV on Thursday, Paulson commented, "Well, I read the Wall Street Journal and the Washington Post today, and I had to pinch myself. I could hardly believe what I was reading." He noted that Fannie and Freddie should still undergo some sort of reform with the U.S. government guaranteeing 90 percent of the mortgages. If the government keeps at it and markets aren't allowed to work, Paulson thinks we'll be right back to 2007 - 2008 all over again.
On the U.S. economy, Paulson feels better, but is still exercising a bit of caution. He said, "I see business investment picking up. You know, housing is starting to recover. The consumer is back a bit. And so I - I'm cautiously optimistic about growth this year. I think we could see growth around 3 percent, 200,000 jobs a month."
Paulson thinks entitlement cuts could be made via "means testing." He would be okay receiving the same Medicare benefits as those struggling to make ends meet. There could also be an extension to retirement for those currently under 50, he commented, and continuous postponement of entitlement reform is a big mistake.
On Fed chairman Ben Bernanke, Paulson said, "I've, first of all, got great confidence in Ben Bernanke, number one. Number two, he's been forced to do some pretty dramatic things to restore our economy, because there's been a lot of inaction in the executive branch and in Congress. Now, what the Fed has done has kept interest rates at an artificially low level. And this has given us a grace period to deal with our fiscal problems, but if you stop and think about it, with 10-year Treasuries yielding about 2 percent in the 1990s, the average was well over 5 percent. And if you take a look and project what is going to happen, in terms of the interest on our debt, when rates go up to a more normal level, that's another reason why I think we need to move pretty quickly and deal with the deficit."
Finally, he thinks the Obama administration is doing well when it comes to handling the financial sector and the economy. He said that Tim Geithner was a key member of the team, "putting in these reforms in place, working with him closely. So President Obama selected him. And then what they did - and I think it was very courageous on Obama's part because there was all these bailouts, these rescues were so unpopular - but Tim persuaded him to stick with the capital markets stabilization programs we had put in place. And then they adapted those very well...to meet the changing situation and managed them very well. And so...there was complete continuity. I think the programs were largely in place when Obama came in the office. I think there could have been...real temptation to go in different direction, to nationalize the banks, et cetera."
NOTE: Fannie Mae reported $17.2 billion in net income for FY12 and $7.6 billion in Q412.
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