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Monday, July 22, 2024

Bush taps Paulson to replace Snow at Treasury

President Bush on Tuesday named Henry "Hank" Paulson as his new Treasury Secretary, enlisting a powerful Wall Street player to lead his economic team as he seeks to lift his sagging poll ratings.

President Bush on Tuesday named Henry “Hank” Paulson as his new Treasury Secretary, enlisting a powerful Wall Street player to lead his economic team as he seeks to lift his sagging poll ratings.

The surprise announcement that the Goldman Sachs chairman would succeed John Snow at Treasury followed weeks of speculation that Bush was about to make a change and won strong initial backing from lawmakers who must approve the nomination.

Paulson, 60, is a former Nixon administration official and a heavy contributor to Republican candidates. He is poised to take the reins of an economy that grew at its fastest rate in 2-1/2 years during the first quarter but shows signs of slowing.

“It looks like they got someone who will be a steady hand and, if any problems arise, will be able to step in to calm the waters,” said Marc Summerlin, an economic consultant who served under Bush in his first term.

Many on Wall Street were pleased that Bush selected someone who speaks their language, but the news did not prevent stock prices from falling amid worry about earnings and oil prices.

It remains unclear whether Paulson will take a stronger role in originating economic policy than did Snow, who was seen by some as a salesman for policy made at the White House.

Paulson raked in more than $38 million in overall compensation last year.

Bush has been frustrated as problems in Iraq overshadowed the robust economic performance and helped lower his approval ratings to around 30 percent. Republicans worry Bush’s woes may leave them vulnerable in the November congressional elections.

Appearing in the White House Rose Garden with Snow and Paulson, Bush praised the Wall Street executive’s ability to explain complicated economic concepts in clear language.

Paulson would continue a tradition in which Goldman has sent executives to Washington, including White House Chief of Staff Josh Bolten and a former Clinton administration Treasury chief, Robert Rubin.

Still, the nomination was a turnabout in Goldman’s relations with the Treasury after the firm was embroiled in an insider trading scandal three years ago while Paulson was in charge.

Goldman’s former senior economist, John Youngdahl, was convicted of improperly guiding trading on news of the suspension of the 30-year bond. Goldman paid more than $9 million to settle civil charges.


The Treasury shake-up was the latest in a series of staff changes Bush has made to try to shore up his popularity, starting with the move of Bolten, the former budget director, to the job of chief of staff.

Bolten was said to have played a key role in luring Paulson to the administration through their Goldman ties.

Paulson will be the point person defending Bush’s tax cuts, which the president insists have boosted growth but that Democrats blame for a surge in government budget deficits.

“He will work closely with the Congress to restrain the spending appetite of the federal government and keep us on track to meet our goal of cutting the deficit in half by 2009,” Bush said.

Paulson must also contend with perceptions in global financial markets that Washington is content to see the dollar’s value fall to help correct huge U.S. trade imbalances.

Currency strategist Ashraf Laidi of MG Financial of New York said the pick of a Wall Street figure of Paulson’s stature might be seen as a defensive step to prevent the dollar slide from accelerating.

Referring to a U.S. push to prod China on trade and currency, Bush said Paulson will “help ensure that our trading partners play by the rules, respect international property rights and maintain flexible market based exchange rates for their currencies.”

Some Republicans complained the job of Treasury secretary lacked the luster in the Bush administration that it had during the tenure of Rubin and other Clinton-era Treasury chiefs.

Signaling he wanted to change such perceptions, Bush said Paulson would “follow in the footsteps of Alexander Hamilton,” the first Treasury secretary and a U.S. founding father.

© 2006 Reuters