David i dont consider myself a journalist. And nobody else would consider myself a journalist. I began to take on the life of being an interviewer even though i have a day job of running a private equity firm. How do you define leadership . What is it that makes somebody tick . After you left as secretary of treasury, hank, you did something that was unusual for many secretaries of treasury. Many of them go back into the finance world or go into the finance world, if they have not been there before. You chose not to do that. Hank i really enjoyed my business career. I had 32 years there. I had an opportunity to serve my country. What i really wanted to do was take my experiences and apply them to addressing two of what i believe are the most pressing issues of our time. U. S. China relations and Climate Change. David many people say that when you are in the finance world, you get on a merrygoround and cannot stop making money, but you said, when you left treasury, i have enough money and i will go do the nonprofit things. Is that right . Hank i never had what i called the disease or addiction to money. When i went to Goldman Sachs, it was 1974. The firm had had a couple of loss years. I was interested, in that time, in working on Financial Issues, working with clients. I was interested in markets. David when you were at goldman, you were not a person who bought your own private plane. You were not a person who had a big house in the hamptons. Hank no, we continue to live in the same house we built when i was making 36,000 a year. When i go skiing, it is at a place where not fancy people go. David with Climate Change, is it your view that Climate Change, as we have called that occurrence, is it due to human activity or would it have occurred without human activity . Hank david, it has been well documented that it is largely caused by human conduct. This poses an enormous risk for our economic security, for our social stability. I see this climate risk as the single biggest and most certain and formidable risk that mankind faces. David do you think the paris accord, which the Current Administration has pulled the u. S. Out of it, though technically i think we dont go out of it for another year. Those people in the government say we dont want to take Climate Change actions that some people like you are advocating, we want to get out of the paris accord, what constituency are they appealing to . Who is the constituency saying, please, lets not do something on Climate Change . Hank i believe that there are very strong vested interests that have different viewpoints than the average american. If you look at the average american, there is a High Percentage of people that are concerned about Climate Change. It is just not their number one issue. But when you look at all of the industries that have a vested interest, beginning with the oil industry and all of the carbonbased fuels, and for instance, one of the things that is going to be very important in dealing with this problem are economic incentives. I think there is a whole variety of economic incentives we could put in place to put a price on carbon taxes and cap and trade systems. But also eliminating the huge subsidies we pay to discover carbonbased fuels. We have no shortage of them, there is no excuse for doing that. David today, as we sit here, i think you have been to china roughly 150 times, Something Like that. Hank a lot. David how did you happen to come to deal with china so much . Hank almost, david, by accident. I was in the Chicago Office of Goldman Sachs working with clients in the midwest, and i was not looking to move to new york. The firm asked me to be a cohead of our Investment Banking division, with a couple other individuals who were in new york. As we were looking at how we might divide things up, we had a big business in europe and almost nothing in asia. One of the guys said to me, why dont you take asia, take china because it is closer to chicago than new york . I was not overly curious, but i was interested. So i began going to asia. So i came back and i talked to my bosses and said, i get the feeling china is about to take off and i would like to do a deep dive and look at opportunities in china. When i made the first trip there in, maybe it was in 1991, we had five people in the hong kong office. When i left to go to treasury in 2006, i think we had 1500 people in greater china. So i put the pedal to the metal. David today, we have two great economies in the world, china and the united states. In your view, is there a clash between the two of them inevitable leading to a real war, not a cold war . Hank well, i would begin by saying that china is a strategic competitor. And there are some compelling differences when we look at our National Security interests. There also are some important shared interests in terms of global stability and things like Climate Change. But to get to your question, i am concerned about what i see as a militarization of the u. S. View toward u. S. China. I will tell you what i mean by that your by that. I take National Security very seriously, but National Security has bled into basically every aspect of the economic relationship. I look at it and i say, i hear about cold war all the time, and there is no way this is a sovietstyle cold war. China is very integrated into the global economy. We are looking at the number one manufacturer, the number one trader, a big exporter of capital. David you got assigned for a little bit of your time to the white house under president nixon, and you worked for jon erlichman. What was that like . Hank i started in the pentagon in april of 1972, six weeks before the watergate breakin. David lets talk about your background. It might not have been predicted when you were growing up in illinois that you would be the treasury secretary, head of Goldman Sachs, a leader in knowledge about china. You were born in palm beach, how did you come to be born in palm beach . Hank i ruined a vacation. My parents were actually in a place called stuart, florida and i came prematurely, so i was born in a palm beach hospital. David your parents had a farm. Hank i had a farm, now. David you grew up on the farm, milking cows. Hank i milked some cows and baled a lot of hay. I did a lot of weeding in the garden. David you said, this is what you want to do for the rest of your life . Hank no, it sure was not. I loved being in the outdoors. My family, god bless them, they would take me up to the northwoods in canada and take canoe trips. We carried everything on our back. We ate fish, we picked blueberries and had blueberry pancakes and so on. I wanted to be a forest ranger when i was growing up in high school. David did your parents talk you out of that . Hank no, they encouraged me to do what i wanted to do. They really encouraged me to get a good education. My mom had gone to wellesley. Her father had gone to yale. I chose dartmouth because it was in the northwoods, and it had small classes and was focused on the undergraduate. David before you got to dartmouth, you were a High School Champion Football Player and wrestler . Hank yeah. David you were allivy Football Player, a defensive lineman. Hank offensive. David you are allivy, Honorable Mention allamerican, and also phi beta kappa. And your nickname was the hammer, what was that associated with . You were good at building homes with hammers, or what . Hank i tended to be i hit pretty hard and tended to be pretty forceful. David when you graduated in 1968, you went to Harvard Business school. Had you had an interest in business so you went straight to Harvard Business school . Hank i wanted to go to oxford and study english, but the vietnam war was in full force. I had a low number in the draft. I got into rotc program i could get into at harvard, and the easiest place to get into in those days was Harvard Business school. I wish i could tell you this had been part of Career Planning but that is how i ended up at Harvard Business school. David you graduated 1970 from Harvard Business school and went to work at the pentagon. How did that happen . Hank at Harvard Business school i basically worked at dartmouth at Harvard Business school, i did not have any business background, i spent most of my time at wellesley courting my wife to be. But one class i did a fair amount of work in was a class that was taught by someone who had been a former assistant secretary of defense. And he recommended me to work in the pentagon for a small Analysis Group that worked on projects for the top leaders of the pentagon. And that really transformed my life. David you got assigned for a little bit of your time in the government to the white house under president nixon and worked for jon erlichman. What was that like . Hank i started in the pentagon in april of 1972, six weeks before the watergate breakin. It looked like, you did not understand the implications at the time. I was there through the election, it was a landslide victory over mcgovern and i got this big promotion. I was going to be erlichmans deputy for Economic Policy. Then watergate hit and blew up, and i watched these people who had very senior positions get carried off. Erlichman got convicted after i had left, but i looked at a number of people there in deep, deep trouble. It made a huge impression on me. But the positive impression was george schultz, secretary of the treasury. He had two guys who worked for him that i had a very good working relationship. David you went back to chicago and joined Goldman Sachs. How did that come about . Hank ive got to tell you careers are a funny thing. As i said, i have never been big on career engineering. When i graduated from dartmouth, i did not know what an investment banker was. But i learned in government that i liked multitasking, and i liked Economic Policy and Financial Issues and problemsolving. So i figured out that Investment Banking might be a good thing to explore. And i also determined i never wanted to live in new york. Ask me why, i dont know. But that was my view. David you are at goldman and obviously did a good job because you got promoted every couple of years or so and you wound up being the ceo of Goldman Sachs, a job you did not aspire to. Right . Hank yeah, you didnt pick. You remember what it was like when we graduated from college and business school. If you wanted to run something, you didnt go into finance or Investment Banking. You went in because you liked the markets, you want to work with clients, work on multiple problems. That is why i picked Goldman Sachs. In 1994, the firm had some problems, i went off to new york. I told wendy, theyre going to pick the next heads of the firm, and said, i wont do that. But then i called her and said i have been drafted to turn things around, but i will only be here for two years. That was a rolling joke because that was a rolling two years. That was 12 years and i loved it. David you became ceo and goldman prospered, did pretty well. Then george w. Bush becomes president , i guess he made a couple of entreaties to you to be secretary of the treasury. You repeatedly said you were not interested. Is that right . Hank i enjoyed doing what i was doing. I had a family that was vehemently opposed to the president. My mother, my wife, my kids. I think, also, at the root of things, although i did not tell myself it was a reason, i knew i was doing a pretty good job running Goldman Sachs, so i said no a few times. But they kept coming back. The last time jim baker made a pretty compelling case, and more than anything else, what hit me was i looked at things and said, guess what . I go around, i recruit all the time at business schools. I tell people, welcome change, change is your friend. And we all hate change. Maybe it was fear of failure that was preventing me from serving my country. And as soon as i saw that, i said, im not going to let that stop me. So i made the jump. David when you joined the government as secretary of treasury, you expected the economy would be in reasonable shape. The economy seemed to be in reasonable shape. Is that correct . Hank yes. David what happened . Hank very early on, in the first meeting that i had with president bush at camp david, when he got his Economic Team together, he wanted me to talk about entitlement reforms, that was one of the things that brought me to washington. I told him i wanted to talk about a financial crisis. I did not see one coming like we had, but i saw excesses, and i had seen them in 1994, 1998. I thought we were due for turbulence in the market. The whole discussion was about that. David ultimately, the Banking System came back and the Financial System came back, but as you look at the system today, could Something Like that happen again . Hank i hate to say this, but we have less authorities today than we had then. David lehman was on the verge of going bankrupt, and you did not have, at that time, the authority to save lehman. I know everybody has asked you about that since then. In hindsight, is there anything you could have done differently . Hank i tell you, i do not think there was. We tried everything we could to get a buyer. Lehman was a bigger problem than bear stearns because they were insolvent. There was a big capital hole. There was no way that a loan was going to solve the problem. It would take capital or a loan guarantee. The thing about lehman, as i look back, we tried very hard and came very close to getting a deal done with barclays. But as we look back on it, as bad as that was, that was not the worst outcome that was possible. Because the crisis had been grinding on for about a year. There were many weak financial institutions. We had three going down in the same weekend. Lehman, merrill, and aig. It turns out we had one buyer. And bankamerica bought merrill. If they bought lehman, merrill would have failed and it would have been a bigger problem. The other thing i will say about lehman, as bad as it was and it accelerated the crisis, it was a symptom, it was not the cause. David ultimately, legislation did get through congress, but it failed in the first vote in the house. What did you think was going to happen then, when it failed . Hank oh, boy. We had a number of terrifying moments, and that was really one of them. Because here is the best way to describe it. For months, we had wanted to go and get these fiscal authorities. It was a big thing for the president to authorize this because there is no way you want to say, we have an emergency, and give us these authorities, and then not get them and be naked right there with nothing you can do to prevent the meltdown of the Financial System. When we went to congress, the cupboard was bare. The president needed to look ben bernanke in the eye and have him assure him there were no authorities the fed had, there was nothing more we could do. We had to go and we absolutely had to get these authorities. David now, the legislation was designed to buy assets initially, but you ultimately decided not to buy assets but to inject money into various banks. Is that correct . Hank i felt putting capital in banks was the only way i knew to do it was to nationalize banks. When you do that, it is a costly thing to do, and it precipitates other Bank Failures. I wanted to avoid that, and i had this theory that it was these illiquid Mortgage Securities that were clogging up the credit markets. If we bought them, it would increase capital and recapitalize the banks. But in the two weeks we were up at congress, the situation worsened. We had two huge Bank Failures in the u. S. , so when i went to the president and basically said to him, guess what, sir . Illiquid asset purchases will not work. He said, you told the world that is what you were going to do. What are you going to do . I said, we are going to have to explain we made a mistake and we need to put capital in the banks and reverse ourselves, and that is what we did. David ultimately, the Banking System came back and the Financial System came back. But as you look at the system today, could Something Like that happen again . With the legislation we now have, are we better able to protect against Something Like that . Hank first of all, our Financial System is much stronger than it was. The banks are better capitalized. It is much less likely to start in the u. S. There is less dry tinder to start a fire. But, and i hate to stay this, but we have less authorities today than we had then. The number one problem we had then, the number one problem by far was we had a Financial System that had outgrown our regulatory system. Our regulatory system and authorities had been put in place after the Great Depression when there was a run on banks, and we had a situation where 60 of the credit was outside of the Banking System. David you worked closely with ben bernanke then, and also tim geithner then, the head of the new york fed. In the Current Administration, there is tension between the fed and the treasury and the fed and the white house. Do you have any comment on whether the fed is sufficiently independent or not, and should we do anything to make sure it is more independent than it already is . Hank ive got to tell you, the thing i am most proud of was that the solution came on a bipartisan basis. I think the last two Times Congress has acted on a bipartisan basis on anything that was consequential, was the tarp authorities and the authorities for fannie and freddie. The way we work across administrations. To get to the current situation, i never ever want to bet against what we can do during a crisis. So i do know Stephen Mnuchin is very competent and understands Financial Issues. I have a very high regard for the chairman of the fed. And i believe if we had a crisis, they would figure out how to work together. David any regrets in this incredible career and what would you see as your legacy . Hank if we had not had the financial crisis i set up the first Environmental Department of treasury. I had raised Clean Technology funds to be housed at the world bank. President bush had said i could work on coming up with some standards for carbon emissions, because there were problems in the carbon market. There is plenty of things i would not do if i had not been waylaid by the financial crisis. I actually look back on it as the honor of my life. To get to serve my country during a time of crisis and help us get out of it. David thank you very much for a very interesting conversation. And thanks for a great career and for your service to our country. Hank thank you. 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