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Henry Paulson

From Alfawiki
Henry Paulson
Born
Henry Merritt Paulson Jr.

(1946-03-28) March 28, 1946 (age 80)
Palm Beach, Florida, U.S.
Occupation(s)Financier, investment banker, government official
Years active1970–present
Known for74th United States Secretary of the Treasury; CEO of Goldman Sachs

Henry Merritt Paulson Jr. (born March 28, 1946) is a prominent American financier and investment banker who held the position of the 74th United States secretary of the treasury from 2006 until 2009. Prior to his appointment at the Treasury, Paulson served as chairman and chief executive officer of the leading investment bank Goldman Sachs.

He was part of President George W. Bush's cabinet until the conclusion of his administration, departing from office on January 20, 2009. Currently, Paulson chairs the Paulson Institute, established in 2011 with a mission to advance sustainable economic development and environmental efforts, initially concentrating on relations between the U.S. and China. Additionally, he holds the role of executive chairman at TPG Rise Climate, a global investment fund.

Early life and education

Born in Palm Beach, Florida, Paulson is the son of Marianne (née Gallauer) and Henry Merritt Paulson, who was engaged in wholesale jewelry. Raised on a farm in Barrington, Illinois as a Christian Scientist, he descends from Norwegian, German, and English Canadian roots. During his youth, he achieved the Eagle Scout rank within the Boy Scouts of America and was honored with the Distinguished Eagle Scout Award.

At Barrington High School, Paulson excelled athletically in wrestling and football, graduating in 1964. He obtained a Bachelor of Arts degree in English from Dartmouth College in 1968, earning membership in Phi Beta Kappa. While at Dartmouth, he belonged to the Sigma Alpha Epsilon fraternity and garnered distinctions such as All-Ivy, All-East, and honorable mention All-America honors playing as an offensive lineman. Following Dartmouth, he earned an MBA from Harvard Business School in 1970. Notably, he declined an opportunity to study at the University of Oxford on scholarship.

Early career

From 1970 to 1972, Paulson worked as a Staff Assistant to the Assistant Secretary of Defense at The Pentagon. Subsequently, between 1972 and 1973, he served within President Richard Nixon's administration as an aide to John Ehrlichman.

Goldman Sachs

Paulson began his tenure at Goldman Sachs in 1974 within their Chicago branch under James P. Gorter’s leadership, concentrating on major industrial corporations across the Midwest. He attained partnership status in 1982. Between 1983 and 1988, he directed the Midwest Investment Banking division and was appointed managing partner of the Chicago office in 1988. From 1990 until November 1994, he co-led Investment Banking before assuming the role of Chief Operating Officer from December 1994 through June 1998. Ultimately, he succeeded Jon Corzine as CEO. His reported compensation reached $37 million in 2005 with projected earnings of $16.4 million for 2006. Estimates place his net worth above $700 million, with cumulative Goldman Sachs income approximated at $480 million.

Throughout his career, Paulson cultivated significant connections with China; by mid-2008 he had visited over seventy times, establishing influential relationships among Chinese leadership.

Prior to his appointment as Treasury Secretary, Paulson divested all Goldman Sachs shares valued at more than $600 million (in 2006) to adhere to conflict-of-interest regulations. Utilizing a tax provision originating from President George H. W. Bush’s administration allowed him to defer capital gains taxes, reportedly saving around $50 million.

U.S. Secretary of the Treasury

Paulson was put forward as Treasury Secretary by President George W. Bush on May 30, 2006, to replace John Snow. The United States Senate confirmed his nomination unanimously on June 28, 2006, and he officially assumed office on July 10, 2006.

Early in his tenure, Paulson identified the widening wealth disparity as a significant long-term economic issue and made it a priority to address. Recognizing the complexities involved in reforming Social Security funding, he committed to seeking bipartisan consensus on the matter.

In response to the subprime mortgage crisis, Paulson was instrumental in forming the Hope Now Alliance, aimed at providing assistance to homeowners facing financial difficulties.

He also took a leading role in managing U.S.-China economic relations, convincing President Bush to allow him to head the U.S.-China Strategic Economic Dialogue. In 2007, Paulson advocated for China to open its capital markets as a means of sustaining economic growth, stressing the importance of open financial systems rather than government control. Although Chinese leaders were initially reluctant during the 2008 financial crisis, China continued to be a vital holder of U.S. debt, supporting American bond issuances designed to stabilize financial markets.

Notable statements

In April 2007, Paulson expressed an optimistic view of the economy, suggesting that the housing sector was "at or near the bottom" and describing the U.S. economy as "very healthy" and "robust."

By August 2007, he credited the limited impact of the U.S. subprime mortgage crisis to the resilience of the global economy.

On March 26, 2008, Paulson stressed the importance of maintaining stable financial markets and ensuring banks continued to provide credit essential for economic support. He identified housing as the main risk factor and underscored regulators' vigilance amid market instability.

In May 2008, he voiced confidence that U.S. financial markets were recovering from the credit crunch that had posed recession risks.

After Indymac Bank's collapse on July 20, 2008, Paulson reassured the public that regulatory oversight kept the banking system secure and manageable.

On August 10, 2008, he announced no plans existed to inject capital into Fannie Mae or Freddie Mac; however, both entities were placed into conservatorship less than a month later on September 7.

During his November 2008 testimony before the House Committee on Financial Services, Paulson acknowledged unprecedented market turmoil and explained adjustments made to stabilize a financial system vital to everyday Americans.

At an event held on November 20 at the Ronald Reagan Presidential Library, he attributed the crisis to governmental inaction, outdated regulations, and excessive institutional risk-taking. He called for strong U.S. leadership in global financial reform alongside domestic regulatory enhancements to prevent future crises.

"Blueprint for a Modernized Financial Regulatory Structure"

On March 31, 2008, Paulson unveiled "The Department of the Treasury Blueprint for a Modernized Financial Regulatory Structure," outlining the urgent need for reforming financial regulation. He highlighted adapting frameworks to globalization and innovations such as securitization to better safeguard investors and consumers.

Lehman's Bankruptcy

Under the leadership of Ben Bernanke at the Federal Reserve and Paulson at the Treasury, support was extended for Bear Stearns' acquisition by J.P. Morgan, along with a $200 billion funding arrangement for Fannie Mae and Freddie Mac, which drew criticism from members of Congress. Paulson and Geithner endeavored to facilitate Barclays' takeover of Lehman Brothers, securing backing from prominent Wall Street institutions but refrained from utilizing public bailout funds due to concerns over political fallout. When British regulators obstructed this transaction, Lehman filed for bankruptcy, prompting Paulson and Geithner to concentrate on mitigating systemic risks.

In the wake of Lehman’s failure, Paulson emphasized that despite market disruptions, the financial framework remained strong. Concurrently, the acquisition of Merrill Lynch by Bank of America contributed to a credit freeze affecting non-financial corporations such as General Electric, leading to significant volatility in U.S. equity and bond markets between September 15 and 19, 2008.

U.S. Government Economic Bailout of 2008

Paulson spearheaded an unprecedented intervention by the U.S. Treasury aimed at averting a deep economic crisis. Following a 30% plunge in the Dow Jones and escalating global market instability, he secured congressional approval for a $700 billion stabilization fund to support the financial sector. In partnership with Federal Reserve Chairman Ben Bernanke, Paulson played a crucial role in establishing an $85 billion credit facility—comprising bridge loans and warrants—to prevent the collapse of American International Group, acknowledging AIG’s extensive involvement in U.S. pensions, life insurance, and European markets.

On September 19, 2008, Paulson advocated for deploying hundreds of billions in Treasury resources to assist financial institutions grappling with troubled mortgage assets that jeopardized liquidity. This initiative became widely known as the "Paulson financial rescue plan" or simply the "Paulson Plan."

Following enactment of H.R. 1424, Paulson assumed oversight of the United States Emergency Economic Stabilization fund. As Treasury Secretary, he also joined the newly established Financial Stability Oversight Board, charged with supervising the Troubled Assets Relief Program.

Paulson and Bernanke concurred that reviving frozen capital markets necessitated direct government capital infusions into banks to restore investor trust. The government acquired non-voting shares offering dividends starting at 5% during the first year and increasing to 9% thereafter until repayment was complete. As detailed in Too Big To Fail, on October 13, 2008, Paulson, Bernanke, New York Fed President Timothy Geithner, and FDIC Chair Sheila Bair presented this strategy to CEOs from nine leading banks.

Time Magazine on Henry Paulson

Time recognized Paulson as a runner-up for its 2008 Person of the Year award, noting that "if there is a face to this financial debacle, it is now his ..." and concluding that "given the ... realities he faced, there is no obviously better path [he] could have followed."

Allegations of Conflict of Interest

Questions emerged regarding possible conflicts of interest linked to Paulson's strategy, considering his previous position as CEO of Goldman Sachs, a significant beneficiary. Although Paulson divested all his Goldman Sachs shares prior to assuming the Treasury Secretary role to adhere to ethics regulations, suspicions about his connections with Wall Street insiders lingered. Notably, Goldman Sachs received approximately $12.9 billion from the AIG bailout, making it the largest recipient of government funds from AIG. The firm's role in structuring the collateralized debt obligations (CDOs) that were central to the financial crisis was substantial during Paulson's leadership.

Detractors contended that Paulson retained close ties with executives who profited from the bailout. After modifications to the bailout legislation, reports suggested that the Treasury proposed deploying the $700 billion fund in ways that deviated from its initial purpose.

Post-Government Career

Following his tenure as Treasury Secretary, Paulson spent a year as a distinguished visiting fellow at the Paul H. Nitze School of Advanced International Studies at Johns Hopkins University and was connected with the Bernard Schwartz Forum on Constructive Capitalism. His memoir, On the Brink: Inside the Race to Stop the Collapse of the Global Financial System, was released in February 2010.

On October 6, 2014, Paulson testified in the case Starr v. United States, which accused the government of unfairly acquiring a 79.9% interest in American International Group (AIG), resulting in a $40 billion loss for shareholders. He characterized the bailout conditions as "punitive" yet essential, recognizing AIG as emblematic of Wall Street excesses.

In September 2015, Paulson was awarded an honorary doctorate in laws and environmental policy by Washington College, presented by former FDIC Chair Sheila Bair.

In April 2016, he joined six other former Treasury secretaries in urging the United Kingdom to remain within the European Union ahead of its June referendum. That same June, Paulson publicly supported Hillary Clinton for president and opposed Donald Trump, criticizing GOP populism as driven by "ignorance, prejudice, fear and isolationism" in an op-ed for The Washington Post.

Paulson serves as a principal figure in the Climate Leadership Council, co-authoring a 2017 carbon fee and dividend proposal alongside notable leaders such as James A. Baker III, George P. Shultz, and Greg Mankiw. The initiative promotes a market-driven carbon tax as a conservative strategy to address climate change in the United States.

The Paulson Institute

On June 27, 2011, Paulson unveiled the creation of the Paulson Institute, an independent and non-partisan "think and do tank" dedicated to enhancing US-China relations with the goal of sustaining global stability amid rapid transformation. Concurrently, he was appointed senior fellow at the University of Chicago's Harris School of Public Policy for a five-year term beginning July 1, 2011.

Author

In his memoir On the Brink, Paulson details his experiences as Treasury Secretary during the Great Recession. His follow-up work, Dealing with China, explores his engagement with Chinese political and business leaders and analyzes China's state-driven capitalist system. This book was chosen by Facebook founder Mark Zuckerberg for inclusion in his book club.

Civic involvement

Paulson has long been passionate about environmental conservation and is an active member of The Nature Conservancy. He held the positions of board chairman and co-chair of the Asia-Pacific Council within the organization. During his tenure, he worked alongside former Chinese President Jiang Zemin to protect Tiger Leaping Gorge in Yunnan. Additionally, Paulson served as co-chair of Risky Business, an initiative focused on raising awareness about the economic consequences of climate change. He also supports Rare (conservation organization), where his wife Wendy holds the title of Chair Emerita.

Together with Erskine Bowles, he co-leads the Aspen Economic Strategy Group and was the inaugural Chairman of the Advisory Board for the School of Economics and Management at Tsinghua University in Beijing.

Within President Bush’s cabinet, Paulson was notably vocal about acknowledging human contributions to global warming and advocated for prompt measures to address it.

While CEO of Goldman Sachs, Paulson oversaw a corporate donation of forested territory in Chile’s Tierra del Fuego, a decision that faced criticism from some shareholders. On a personal level, he contributed US$100 million toward conservation initiatives and committed to bequeath his entire wealth to environmental causes upon his passing.

Personal background

Paulson met his wife Wendy (née Judge), an alumna of Wellesley College, during his final year at university.

The couple has two grown children: Henry Merritt Paulson III, commonly known as Merritt Paulson, who owns sports teams, and Amanda Paulson, a journalist and Dartmouth graduate. The Paulsons welcomed their first grandchildren in June 2007.

They reside in both Chicago and Barrington Hills, a suburb near Chicago. In 2016, Wendy Paulson emphasized how Christian Science principles play an important role in their family life.

Media portrayals

In film, Paulson was depicted by William Hurt in the 2011 HBO production Too Big to Fail and by James Cromwell in the 2009 BBC movie The Last Days of Lehman Brothers.

The 2010 documentary Inside Job identifies Paulson as a key figure responsible for the 2008 financial crisis and lists him among Time's "25 People to Blame for the Financial Crisis."

In September 2013, Bloomberg Businessweek released Hank: Five Years From the Brink, a documentary directed by Oscar nominee Joe Berlinger and distributed via Netflix.

Paulson is also featured in HBO’s 2018 documentary Panic: The Untold Story of the Financial Crisis.

Awards and distinctions

  • 2007: Golden Plate Award from the American Academy of Achievement, presented by Chicago Mayor Richard M. Daley
  • 2009: Harvard Business School Alumni Achievement Award
  • 2011: Leadership Award from the Committee of 100 for Advancing U.S.-China Relations
  • 2016: Environmental Achievement Award from the Environmental Law Institute

Bibliography

  • Paulson, Hank and Hu, Fred: "Banking Reform in China: Mission Critical", included in Pamela Mar and Frank-Jürgen Richter (eds.): China – Enabling a New Era of Changes, New York: John Wiley, 2003
  • Paulson, Hank, On the Brink: Inside the Race to Stop the Collapse of the Global Financial System, New York: Business Plus, 2010
  • Paulson, Hank, Dealing with China: An Insider Unmasks the New Economic Superpower, New York: Twelve, 2015

References

Additional reading

External links

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