Paulson earning plaudits
WASHINGTON – Treasury Secretary Henry Paulson, the consummate Wall Street baron who amassed a fortune at investment giant Goldman Sachs, is applying his insider knowledge to help manage a credit-market meltdown.
Known as “Hank the Hammer” when he led Goldman Sachs, Paulson is winning praise for using hard-nosed bargaining tactics to strike deals seen as critical to coping with the worst crisis to face financial markets since the savings and loan crisis of the early 1990s.
Paulson heads the President’s Working Group on Capital Markets, which briefed President Bush at the White House on Monday. He said the president was “quite pleased” with the results of the marathon negotiations over the weekend that resulted in a deal for the sale of troubled investment house Bear Stearns Cos. to JPMorgan Chase & Co.
The hurry-up sale was seen as a way of keeping the impending collapse of Bear Stearns from dragging down other big Wall Street firms and perhaps plunging the country into a deep recession.
The sale, announced late Sunday, occurred after Paulson and another former Goldman Sachs executive, Treasury Undersecretary Robert Steel, combined forces with Federal Reserve Chairman Ben Bernanke and other Fed officials. Under the deal, JPMorgan would take over Bear Stearns with financial backing from the Fed.
Paulson kept Bush informed through the weekend of the discussions including the Fed’s increased efforts to bolster credit markets. Paulson and Bernanke have continued the practice of past Treasury and Fed leaders of holding weekly breakfast meetings and conferring more often during crises.
While the administration still insists it is adhering to its free-market principles, those principles did not stop Paulson from getting actively involved when it looked like the collapse of Bear Stearns was imminent.
That pragmatic approach is winning kudos for Paulson, who is seen as a vast improvement from Bush’s first two Treasury secretaries. Paul O’Neill and John Snow lacked the Wall Street expertise that Paulson brought to the job and had little sway on policy.
But even with the conclusion of the Bear Stearns sale, the administration and Paulson continue to be criticized for failing to do enough to protect millions of homeowners still in danger of defaulting on their mortgages.
© Copyright 2008 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.