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Thursday 4 December 2008

Can Comrade Hank find a way through this crisis?

The US Treasury chief sees his interventionism as a case-by-case response to unprecedented events, says James Doran, but his critics see it as inconsistent, dangerous and ‘un-American’

It’s hard to keep up with Hank Paulson, the grim-faced US Treasury Secretary and would-be architect of a new financial order. Over the past eight months, since the collapse of the investment bank Bear Stearns, Paulson has been confronted with an escalating crisis that has engulfed Wall Street, plunged markets into chaos, and threatened to push the global economy into deep recession.

And at each milestone on the road to ruin, Paulson — Hermes-like — has presented a different face. When he accepted the Treasury job in July 2006, it seemed the perfect final posting of a perfectly planned career. The former Eagle scout, wrestling champion and all-Ivy League American football star graduated from Harvard with an MBA in 1970 to work first at the Pentagon, then as an adviser to John Ehrlichman, the controversial counsel to Richard Nixon who was told to seek and destroy the President’s enemies in government. It is rarely mentioned these days, but Paulson was Ehrlichman’s right-hand man from 1972 to 1973, at the height of the Watergate investigations that culminated in Ehrlichman’s resignation and later his 18-month prison sentence. It’s hard to imagine a better training in the dark side of politics.

Paulson emerged unscathed from Watergate: he was, after all, hardly a key player and he was very young. He moved on to join Goldman Sachs and become a partner in 1982. A stellar career took him on upwards to chairman and chief executive in 1999. But when he accepted the job of Treasury Secretary at the tail end of the Bush administration, Paulson’s biggest worry was that he would sink into obscurity and fail to make a difference — not something he was used to. Many of his contemporaries agreed. With just two years to make his mark and waning Republican support in Congress, not much was expected of him. How wrong they were.

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