Henry Paulson Jr., the chairman and chief executive of Goldman Sachs, likes snakes.
“I like to hold them and look at them,” the banker and amateur herpetologist once told an interviewer.
It was perhaps tempting, then, after President George W. Bush on May 30 declared Mr. Paulson his choice to be the next Secretary of the Treasury, to focus on that qualification: Mr. Paulson—“Hank,” the President called him, as all Mr. Paulson’s friends do—knows a snake pit when he sees one.
With his most recent overall job-approval ratings at 31 percent, Mr. Bush’s White House has become known for internecine battles and claims of top-down management that reportedly made filling the position difficult. The President had, according to published reports, been unable to persuade Stan O’Neal of Merrill Lynch or John Mack of Morgan Stanley to take the job.
And the difficulties swirling around the Bush White House, according to a New York Times report, were not incidental to Mr. Paulson’s decision: In a secret May 20 meeting, The Times reported, Mr. Paulson extracted assurances from the President that his involvement in top-level policy-making would be real.
“In Washington, everybody thinks they’re the boss—the staffer at the White House overseeing you thinks he’s the boss, the Vice President of this administration thinks he’s the boss … and, of course, the President thinks he’s the boss,” said Fareed Zakaria, Newsweek’s international editor and a social friend of Mr. Paulson and his wife, Wendy. “And, meanwhile, you—having a healthy ego as a cabinet minister—thought that you were the boss! Navigating that world that is very horizontal—in a way that most private-sector organizations are vertical—is difficult. But I think that Hank will be able to do it. He has the personality for that.”
Nevertheless, it’s a long way from Wall Street to Washington. Much has been made of the fact that President Bush went to Wall Street to find his latest Treasury Secretary. It probably is significant, in that Mr. Bush seemed to be so ardent to depart from his usual stock-in-trade: old Beltway and “Bush 41” Republicans, heartland industrialists.
In fact, the contrast between Mr. Paulson and Paul O’Neill, the Bush administration’s first Treasury Secretary, is stark.
Mr. O’Neill had served in the Office of Management and Budget under Gerald Ford. He then spent his career climbing the corporate ladder at the International Paper Company and later jumped to serve as chairman and C.E.O. of Alcoa, an aluminum conglomerate.
His ties to the Bushes extended back to the late 1980’s, when George H.W. Bush invited him to serve as Defense Secretary. He declined, but reportedly recommended Dick Cheney for the job.
Years later, it was reportedly Vice President Dick Cheney who recommended Mr. O’Neill for the Treasury Department.
Three days after Sept. 11, the President came with Mr. O’Neill to ring the opening bell at the New York Stock Exchange on the day it reopened after the attacks on the World Trade Center.
The Internet heyday had passed, projections for the American economy after Sept. 11 were dour, and sentiment for the good old days under Goldman alumnus and Clinton administration Treasury Secretary Bob Rubin were running high.
Mr. O’Neill’s term would not go well. When a report he commissioned projected inevitable tax increases and spending cuts to avert a massive budget deficit, he left under pressure and became a harsh critic of the administration.
He would complain that he was left out of all of the major policy decisions regarding spending—and, in particular, he complained that the decision to wage an expensive war in Iraq was taken in the President’s first National Security Council meeting, away from all Treasury scrutiny.
Then came Mr. Snow, a former railroad executive whose term has been described as largely responsible for attempting—and failing—to sell the country on an economic agenda already set rather than coming up with one himself.
Indeed, there’s a long history of going to Wall Street to bring in ideas, when the echo chamber of a second White House term starts to deafen it to the public.
“If you were to go back to the Kennedy administration, the Treasury Secretary or senior Treasury person would likely have come from Dillon Read or Brown Brothers Harriman,” said Kenneth Froewiss, a professor of finance at the Stern School of Business at N.Y.U.
Maybe it’s time for another Bob Rubin? A Republican Bob Rubin?
And yet, the fact that Messrs. Rubin and Paulson have both been Goldman chiefs and New Yorkers may be among their few similarities. Though Mr. Paulson has ingratiated himself in New York’s charitable circuit, he is hardly a typical New Yorker—except for that Goldman pedigree.
“Hank Paulson’s really not a new Yorker,” said G.O.P. fund-raiser and merchant banker Mallory Factor. “He’s from Illinois; he made partner in the Chicago office of Goldman. Though he’s become one by what he does. He is the archetypical Goldman Sachs–type person.”
Discreet, press-shy, and very, very smart.
The farm-born Hank Paulson is a New York anomaly. Raised on a farm outside Chicago, he ultimately bought some of the acreage and set out a homestead there.
He moved to New York in 1994 and currently lives in the Millennium Tower on West 67th Street, above an IMAX Theater. That gives him ample time in Central Park, where his wife, Wendy, guides bird-walks.
But they do what they can.
“They’re not on the social circuit,” Mr. Zakaria said of Mr. Paulson and his wife. “His passions are going into Central Park early in the morning for a jog and listening to bird calls.”
Lewis Eisenberg, a former partner of Mr. Paulson’s at Goldman Sachs, had fly-fishing stories about Mr. Paulson—not golf stories.
“When the fish know Hank’s coming, they move to the other side of the stream,” he said. But also: “Whatever he catches, he releases.”
Mr. Paulson met his wife, Wendy, at Harvard Business School, and she learned early of his love of the outdoors and of ecology.
The marriage has grown into one of the most important fund-raising sources for biodiversity causes.
He chaired the board of the Peregrine Fund, which protects birds of prey. He’s now the chairman of the board of the Nature Conservancy. He told BusinessWeek that his father got him interested in nature: “When we went horseback riding, he’d point out sparrows and meadowlarks.”
Ms. Paulson was the first of the two to join the Nature Conservancy board. In 1998, her husband joined the leadership of the nonprofit—whose mission is the preservation of land and
But their contributions to the city have been broader than that.
Mayor Michael Bloomberg, who said Mr. Paulson called him on the morning of the announcement to tell him he’d taken the job, described how the corporate chieftain opened his wallet for the city.
“Whenever I’ve had to raise money for something that this city needs, the first call has always been to Hank, and he’s always come through,’’ Mr. Bloomberg told reporters. “He almost gives you his checkbook and says, ‘Write what you want.’ Doesn’t quite do that, but he’s been there every time.”
“There are some people who are very involved in philanthropy who have very high social profiles,” said David Patrick Columbia, the preeminent Internet chronicler of New York’s jet set. He mentioned Jamie and Peter Gregory, Paul and Daisy Soros, Muffie Potter Aston.
“They,” he said, “are not those kinds of people.”
Nor, at the policy level, has Mr. Bush chosen someone that easy to brush past on major policy issues.
Mr. Paulson, who earned praise from Senator Chuck Schumer after his introduction in the Rose Garden, was commended for his interest in China.
Presently, the White House wants a Treasury Secretary with the muscle to move China to reevaluate its currency.
While Mr. Paulson’s position on the issue may not be known, his clout in China is.
By Mr. Zakaria’s estimate, he and Ms. Paulson have been there 30 or 40 times and are aficionados of Chinese culture, as well as champions of various conservation issues there.
Mr. Paulson was particularly interested in trying to help save natural spaces in China, by creating a series of national parks in Yunnan Province. One of his strategies involved recruiting other high-profile C.E.O.’s to the cause, as well as working with local politicians to protect the land. The conservancy has also donated energy-efficient stoves to Yunnan residents, according to Forbes.
He was also a guest at the April 20 White House lunch fêting Chinese President Hu Jintao.
And what about fuel policy?
In early May, Goldman made a $30 million investment in Iogen Corp., a Canadian company that transforms agricultural products into cellulose ethanol—one of the highly touted new renewable-energy sources.
“This is one of a number of investment opportunities in the renewable-energy sector that Goldman Sachs has identified and believes has the opportunity to yield attractive returns,” a company spokesman said at the time.
Indeed, it was in New York, and during his time at the top of Goldman, that Mr. Paulson forged his most important connections to the Republican Party—and as a New Yorker and the chief of Goldman that he has made the bulk of his more than $300,000 in private donations to Republican causes.
He is also seen as a restorer of dignity to Wall Street, shocking fellow Goldman bankers with a 2002 speech to the National Press Club in which he decried the high compensation levels of many of his peers.
And some have fingered him as the Wall Streeter behind the fall of former NYSE chair Dick Grasso, who was toppled after his compensation from the exchange came under scrutiny.
As recently as last year, Mr. Paulson became popular in New York for working out an agreement with the city to save a deal to build a new headquarters for Goldman Sachs near Ground Zero, playing hard-to-get with Governor George Pataki and Mayor Bloomberg, and winning.
Mr. Paulson did not get his way on a tunnel that Mr. Pataki wanted to construct for the West Side Highway. Even though it would create a nice, car-free oasis between the World Trade Center site and Battery Park City, Mr. Paulson thought it would cause drivers to speed up and, when they exited the tunnel, hit pedestrians right at the point at which the bank’s new headquarters would have its entrance.
So Mr. Paulson put the building on hold. He twiddled his thumbs for an entire summer, hemming and hawing about looking elsewhere in Manhattan, although there was really nowhere else to look.
The bank did not even pretend to be looking in New Jersey, where a Goldman building, already constructed, stood half-empty because no trader wanted to take the PATH.
But with the criticism of the slow rebuilding effort reaching fever pitch, Mr. Paulson didn’t need to be logical to keep the Governor and Mayor at his beck and call. In August, the final deal came to light, with about $250 million more in economic incentives and a package of Sept. 11–related Liberty Bonds that the bank ended up writing itself!
The part that showed the world the most about Mr. Paulson’s mentality, though, was the money-back guarantee: If the state and city do not come up with a sufficient security plan for lower Manhattan by the end of 2009, then Goldman gets back the $161 million that it’s paying for a 64-year lease of the site.
So why does Mr. Paulson like predatory animals?
“I’m fascinated,” he told an interviewer during a trip to Palau to study coral-reef preservation, “because they’re at the top of the food chain.”