In an interview with Larry Kudlow for Real Clear Politics U.S. Secretary of State Henry “Hank” Paulson explained what the U.S. federal government has tried to do in recent weeks and days, and what he thinks will happen to the economy in the mid to long term.

“ The retail sales numbers came in at a disappointing level, but not a surprising level. So, I think what the markets are saying today is that they understand that we are going to have a difficult few months ahead of us. But what I would say is let us remember that we have a very resilient economy. Last quarter we grew at 2.8 percent,” Paulson said when talking about the link between the crisis in the financial markets and the crisis in the overal economy.

“[B]y far the most important thing we can do here is stabilize the markets, stabilize the banking system, and I’m very confident that the moves we’ve done, taken, will do just that,” he went on to say. He then explained what the meeting with the biggest U.S. banks was like in which he told them to cooperate with the bailout effort (or else). “What I said to them was – this is about the United States of America – it’s about our economy – it’s about our banking system and this is a program for healthy banks. This is not about failure. We want healthy banks to participate in this, because healthy banks need to be well capitalized. They need to be dealing with other healthy banks and with businesses. They need to be deploying their capital. This will be good for the country, it will be good for the system, and good for all of you.”

“We talked to everyone and there are institutions that could survive just fine without more capital – they have adequate capital – but they need to be well capitalized. What we want to do is to come up with a program. Remember something else about this program. There is nothing punitive about this program. This is a program that said to all the investors that want to come into the banking system, that when the government comes in it is not coming in to squash private investment,” Paulson explained, “this is about increasing confidence in the banks and about increasing confidence of the banks and the banking system so that they can be proactive in deploying their capital.”

“Now, the way you get bankers to deploy the capital — because they know it’s their job to deploy the capital, making the loans which are so vital to our economy — the way you get them to do that is they’ve got to have, first of all, plenty of capital; they’ve got to be well-capitalized. Secondly, they’ve got to be confident in the system. They’ve got to be confident that as the money flows between and among banks that they’re confident in that and confident in the strength of the system,” he went on to say.

Paulson led the biggest bailout effort in U.S. history.

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