Former U.S. Secretary of the Treasury, Hank Paulson¸ made a stop in Asia last Monday to discuss U.S./China economic relations at Hong Kong University. Much of the conversation, expectedly so, felt like scripted award show banter with moderator, Victor K. Fung, chairman of Li & Fung Group and vice chairman of the China-United States Exchange Foundation. Alternating between banker, regulator and apologist, depending on the question, Paulson held the heavily prescriptive U.S. derivatives regulation as an example of improvement and victory in the country’s financial laws, when asked about progress since the global financial crisis. Not 15 minutes later though, he was back in his Goldman Sachs hat, touting free enterprise--“Regulation in many cases is the wolf in sheep’s clothing.”
The crowd, comprised predominately of university students, erupted into cheers when Fung asked Paulson why the U.S. government had allowed Lehman Brothers to fail while saving AIG and Bear Stearns. After the well-timed chuckle and feigned surprise of Paulson at the question, he opened his response with, “I know only a small number of you will understand this.” He told the stories of the AIG and Bear saviors and when it came to Lehman failing, basically threw the hot potato of blame to the U.K. regulators who refused to let Barclays Capital buy the failing firm. I’m pretty sure most of the audience understood that.
When it came to speaking on the topic at hand, Paulson maintained that the U.S. and China mutually benefit from the other succeeding, and that the U.S.-based commonly held view that if China continues to grow, the U.S. will fail, needs to be left behind. However, when fielding an audience question on the human rights issues in China and how that could impact U.S.-China economic relations, Paulson said that the U.S. would respectfully make its views on the topic known, while continuing to pursue shared economic goals.
