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A Skeptical Outsider Becomes Bush's 'Wartime General'
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Paulson put it bluntly: "We are going to [take you over] and we want you to agree to it, and you will have a board meeting tomorrow and you are going to agree to it at your board meeting." Paulson never acknowledged that, under law, the companies had a choice in the matter.
Within days, Paulson had compelled them to agree that they would be nationalized.
"Not that I think it's a good thing; it should never work that way," he said. "But this was an extraordinary time period, and as much as I didn't want to do it . . . I knew what would happen if we didn't do it."
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When President Bush first settled on a chairman of Goldman Sachs named Hank Paulson to be his new Treasury secretary, the administration couldn't seal the deal.
Nearly everyone Paulson talked to advised him not to do it. He spoke to family. He spoke to colleagues. They raised concerns about whether his reputation would be tarnished, as happened to Bush's first two Treasury secretaries, Paul H. O'Neill and John W. Snow. They proved ineffective, some political analysts said, because their authority had been undercut by the White House.
Even one of Bush's Cabinet secretaries counseled Paulson against coming to Washington, Paulson said. "Don't come down here; you can't trust them," he recalled being told. He declined to identify the Cabinet member.
Paulson was afraid of failing. "I will get down here and I won't be able to work with these people, and I'll leave with a bad reputation, and look at what people said about Snow and O'Neill," he said.
After the second time Paulson turned down the job offer, White House Chief of Staff Joshua B. Bolten, invited Paulson and his wife for lunch with Bush and President Hu Jintao of China. Paulson recalled feeling melancholy as he left the White House, reflecting on what he was about to pass up. He reconsidered.
Paulson sought out Allan B. Hubbard, director of the National Economic Council at the time, who guaranteed that the White House team would not undermine the Treasury Department.
Bolten said the toughest job was convincing Paulson that he could still accomplish important goals as Treasury secretary in the last years of the Bush administration. But giving Paulson written assurances that he would have broad authority at the Treasury was not hard for the White House.
"The real problem was getting Hank to be willing to do the job -- he was sitting on top of the world in early 2006," Bolten said. "He had heard that this is a very White House-centric operation, which in some respects it has been, and the secretary of Treasury did not have much authority and so on, and he wanted to be assured he would be leader of the economic team. To me that stuff was easy. The president would be in charge, but yes, you are the leader of the economic team."
