7th June...Paulson & Goldman politics
Euromoney June 2006
By Abigail Hofman
“Ask not what your country can do for you – ask what you can do for your country,” thundered John F Kennedy in his inaugural address. Hundreds of column inches have been devoted to former Goldman Sachs chairman and chief executive Hank Paulson’s nomination as US Treasury secretary. Hank will not be pleased by this largesse of newsprint. For Hank, like Prince Charles, is a tree-hugger. He is chairman of The Nature Conservancy, an American environmental group. In deference to Hank’s green side, I will therefore keep my remarks brief.
Indisputably, Paulson’s tenure at the top of Goldman has been a success. Look at the rocketing share price, record profits and the breadth of the business. Detractors grumble about conflicts of interest. The Economist, for example, criticizes Goldman’s “metamorphosis from being chiefly an agent that represented clients to a principal that found it profitable, sometimes, to help others as well”. To me this is akin to gloating at an inch of cellulite on a friend’s finely honed thigh. Don’t let’s forget that Mr Paulson’s job as CEO was not easy: keeping team Goldman together and the partnership spirit intact must have been challenging after the IPO in 1999.
More intriguing is why Paulson is leaving Goldman. It’s not about the opportunity. There are rumours that he was a candidate for the Treasury job before John Snow got it in 2003. And from what I read, there was an awful lot of huffing and puffing before Paulson accepted Bush’s proposal this time around. The Wall Street Journal reported that Paulson cancelled an invitation to have dinner with Bush in mid-April because he didn’t want the president to believe he would take the job. When Bush and Paulson did meet on May 20, Paulson was still prevaricating but relented the next day because, apparently, he felt he might have regrets.
“Is HP a bit of a PT?” I ask myself. His behaviour certainly resembles that of a pretty girl who can’t decide whether to sleep with an unprepossessing suitor. When Paulson didn’t go to Washington last time, Goldman Sachs lost both its then co-presidents, John Thornton and John Thain. How much longer would Hank’s number two, Lloyd Blankfein (responsible last year, some say, for 70% of the firm’s profits), have hung around? The inside story on this story is best summed up as: “It’s all about politics. Goldman politics, not Washington politics.”
My mole insists that Hank is “a do it my way or take the highway” type of guy who doesn’t respect dissent. I’d love to eavesdrop on a Hank and George conversation about the environment. The president is probably the only person left on the planet who won’t admit that global warming is a threat. And Paulson is probably the only person who hangs around Central Park trying to spot birds (not the human kind). Hank says: “It’s hard to think of an animal I’m not interested in.” George says (to paraphrase comedian Jay Leno): “I’m interested in alternative energy sources. How about solar energy? Let’s invade the sun.”
Paulson is poised to pick up a poisoned chalice.
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