Ex-Treasury secretary defends crisis response

WASHINGTON -- Former Treasury secretary Henry Paulson on Wednesday defended his response to the economic crisis late last year as an imperfect but necessary rescue of the crumbling financial market.

His remarks, made in written testimony prepared for a hearing today, came as Congress began an independent probe of the government's handling of the crisis.

"Our responses were not perfect.... But, having had the benefit of some time to reflect, and to consider views expressed by others, I am confident that our responses were substantially correct and they saved this nation from great peril," Paulson wrote.

Paulson also defended himself against allegations that he pressured Bank of America Corp. into acquiring Merrill Lynch, despite Merrill's mounting financial losses that Bank of America stockholders absorbed. Paulson said the merger was in the best interest of the nation and the two firms, and that remarks he made during discussions of the deal were "appropriate."

Also on Wednesday, congressional leaders announced their picks for a 10-member panel that will investigate the causes of the financial crisis. It is expected to release its findings by Dec. 15, 2010.

Democrats picked Angelides, former state treasurer in California who lost a 2006 bid to become state governor, to chair the commission. Republicans tapped former California Rep. Bill Thomas, who led the House Ways and Means Committee, as co-chair.

Democrats also chose Brooksley Born, a former financial regulator who warned against lax rules for derivatives; Bob Graham, the former Democratic senator from Florida; John Thompson, board chairman of the Symantec Corporation; Heather Murren, a retired Merrill Lynch director; and Byron Georgiou, a Las Vegas businessman.

In addition to Thomas, Republicans picked Douglas Holtz-Eakin, an economic policy adviser to Sen. John McCain during the 2008 presidential campaign; Peter Wallison, general counsel at the Treasury Department during the Reagan administration; and Keith Hennessey, an economic policy adviser to President Bush.