Bush's Nominee From Wall Street

Goldman Sachs chief executive Henry M. Paulson Jr. is President Bush's nominee to replace the outgoing Treasury secretary.
Goldman Sachs chief executive Henry M. Paulson Jr. is President Bush's nominee to replace the outgoing Treasury secretary. (By Win Mcnamee -- Getty Images)

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By Brooke A. Masters
Washington Post Staff Writer
Wednesday, May 31, 2006

NEW YORK, May 30 -- Treasury Secretary nominee Henry M. Paulson Jr. is often described as the kind of guy who thrives in a crisis.

In 2003, Paulson was chairman of the Nature Conservancy when the Arlington charity came under withering scrutiny for a variety of practices, including drilling for oil and selling undeveloped land to its trustees at reduced prices. Paulson immediately took charge, moving to rectify problems that had occurred during his tenure.

He brought in a crisis-management team from Goldman Sachs Group Inc., where he worked as chairman and chief executive, and put together a committee stacked with high-profile outsiders to study the charity and recommend changes. Then he sold the package to both the charity's supporters and its critics in Congress.

"He just went out and grabbed the problem and really worked it hard to get a good result," said Ira M. Millstein, a New York lawyer who headed the outside committee. "He was an outstanding leader of his board and an excellent crisis manager."

A few months later, Paulson again had to deal with crisis that developed on his watch. This time, after the New York Stock Exchange drew fire for awarding then-chairman Dick Grasso a $139.5 million retirement package, Paulson led a board revolt that forced out Grasso and led to both the separation of the exchange's regulatory and trading functions and the eventual decision to convert the not-for-profit exchange into a public company.

Over the years, Paulson has not shied away from controversy, but he has also been criticized for not paying enough attention until a crisis occurs. He owes his position as the sole head of Goldman to a 1999 coup in which he and several allies forced out Jon S. Corzine -- now the governor of New Jersey and a former U.S. senator -- and Paulson steered Goldman through the stock-analyst scandal relatively unscathed. Although the firm ended up paying $110 million to settle allegations that its research reports were too closely tied to investment banking, it paid less than its top competitors and, unlike several of them, was not accused of publishing fraudulent research.

"He's had to handle a lot of very difficult situations, and he has handled them well," said Robert E. Rubin, who served as Treasury secretary under President Bill Clinton and as Paulson's former boss at Goldman Sachs. "He's smart, he's bright, he's thoughtful, and he's intense. He's a very good choice."

Though Paulson reportedly rebuffed several earlier efforts to recruit him to replace outgoing Treasury Secretary John W. Snow, the Goldman Sachs chief is following a well-trod path. Goldman Sachs has a well-established history of sending top executives to Washington. In addition to Rubin and Corzine, Chief of Staff Joshua B. Bolten is a Goldman alumnus, as are Stephen Friedman, who led the National Economic Council until recently, and Kenneth D. Brody, who headed the Export-Import Bank under Clinton.

Balding and lanky, Paulson spent part of his early career in Washington, working first in the Pentagon and then as a staff assistant in the White House under President Richard M. Nixon. He joined Goldman Sachs in 1974 but spent most of his career in the Wall Street firm's Chicago office, only moving to New York after being named chief operating officer in 1994.

Since then, Paulson and his wife, Wendy, have largely shunned the New York social circuit. Though he is worth hundreds of millions of dollars -- last year alone he pulled down $38.8 million -- they have never joined a country club. Rather than summering in the Hamptons or tony Martha's Vineyard, the Paulsons maintain a home on a five-acre plot carved out of the Barrington, Ill., farm where he grew up. They are practicing Christian Scientists, so Paulson does not drink, and he regularly reads the Bible while on the road.

Between them, they have given $426,000 to federal candidates since 1989, more than $370,000 of it to Republicans, according to the non-partisan Center for Responsive Politics. Henry Paulson was a "pioneer" for President Bush, meaning he raised more than $100,000 for the 2004 campaign. Most of the $55,000 that went to Democrats came from Wendy Paulson, who listed her occupation as homemaker or volunteer.

Dedicated nature-lovers, the Paulsons spend most of their free time on outdoor pursuits, including birding, kayaking and trips to exotic places to see the flora and fauna. Henry Paulson is fascinated by birds of prey, calling them "canaries in the coal mine" of the planet's environmental health because they sit atop the food chain. Every year, he arranges for a rare bird to visit the firm and invites 25 employees to come to the 30th-floor boardroom to meet the avian guest. Wendy Paulson, an environmental educator, was the first member of the family to become involved with the Nature Conservancy, but her husband shared her passion and joined the organization's board in 2001 when she rotated off.


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