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The 2000s in America

Paulson, Henry

by Lee Tunstall

Identification: American banker and US secretary of the treasury, 2006–9

Born: March 28, 1946; Palm Beach, Florida

Hank Paulson, Jr. was named the United States treasury secretary in June 2006. Paulson worked at the White House in the 1970s, under President Richard Nixon, then left to work at the investment bank Goldman Sachs. He rose to the top of the bank and presided over its transition from a private to a public bank. He left the bank in June 2006 to become treasury secretary. Secretary Paulson saw a severe decline of the US and world economy, which many claimed was the worst since economic crisis since the Great Depression of the 1930s.

In 1998, Goldman Sachs chairman Henry (Hank) Merritt Paulson forced out his cochairman, Jon Corzine, and became the investment bank’s chief executive officer (CEO). He then guided the bank through its transition from a private to a public entity by issuing an initial public offering (IPO), whereby the bank offered its shares for sale to the public for the first time. He was also one of the proponents of taking more risk at investment banks and he was well compensated for his efforts. Paulson earned $30 million in 2004 and $37 million in 2005; his personal fortune is estimated to be $700 million. With this wealth, he has supported numerous Republican political candidates, donating over $336,000 to the party between 1998 and 2006.

Paulson has also donated $100 million of his money to a family foundation which supports conservation and environmental education. This interest in conservation also led him to follow his wife onto the board of directors of Nature Conservancy, where he spent two years as chair. There, he leveraged his connections in China as cochair of the organization’s Asia-Pacific Council. He worked with the People’s Republic of China president (1993–2003) Jiang Zemin to preserve the Tiger Leaping Gorge in Yunnan province. His other volunteer work included his role as founding chairman of the advisory board of the School of Economics and Management of Tsinghua University in Beijing, and membership on the boards of the Peregrine Fund, Catalyst, and J. L. Kellogg Graduate School of Management at Northwestern University. Paulson also served on the board of the dean’s advisors of the Harvard Business School.

On June 28, 2006, President George W. Bush named Henry Paulson at the seventy-fourth secretary of the Treasury. He was unanimously confirmed by Congress on July 10, 2006. He played a prominent role in the global financial crisis that began in 2006, but boiled over in 2008. With theburst of the housing bubble in 2006, mortgage holders began defaulting on their loans, lenders failed, and mortgage-backed security values began to fall. The repercussions were seen in Wall Street firms and at Freddie Mac and Fannie Mae, government sponsored companies that hold almost half of US home mortgages.

In the spring of 2008, Paulson developed plans to stabilize and work out deals to shore up the financial markets. He oversaw the demise of three of Goldman Sachs’s main rivals, namely Lehman Bros, Merrill Lynch and Bear Stearns, and has also engineered government bailouts for other failing entities. In September, Freddie Mac and Fannie Mae were purchased by the federal government for $200 billion. This was followed by an $85 billion bailout of the insurer American International Group (AIG), for which the American taxpayer received an 80 percent stake in the company.

Later that month, Paulson requested $700 billion from Congress for the Troubled Asset Relief Program (TARP). This program was initially designed to buy troubled assets (“toxic loans”) from banks, and Paulson warned it was necessary to ensure that banks would continue to loan money to one another. The House of Representatives initially rejected his plan, finding that the proposal gave too much authority to the secretary, with not enough accountability. After a tense week of negotiations, the three-page proposal became a 400-page bill that was passed first by the Senate and then by the House. In November 2008, Paulson announced that he had changed course and decided to invest directly in banks to encourage lending.

Throughout this process, Paulson has been accused of trying to protect wealthy shareholders, like himself, who many feel are responsible for the economic collapse. He has been accused of socializing debt and privatizing profits. Questions regarding the allocation of the initial half of the TARP program have also arisen, with taxpayers and legislators wanting specific information as to how the money is being spent. Paulson has been reluctant to disclose the names of banks and the amounts that they have received because this information may cause the public to lose faith in a given institution’s solvency. Paulson has emphasized that the primary goal of government action in the bailout has been to create stability and public confidence in the markets.

In November 2008, Paulson told reporters that he would not be spending the remaining $410 billion of the TARP funds, hoping to hold the funds for emergency use.

Henry Paulson (left) and Ben Bernanke

AUGHTS_PaulsonHenry.jpg

(©iStockphoto.com/Alex Wong)

Impact

Paulson served as US treasury secretary until January 2009. During his tenure, he created a number of programs, including the Hope Now Alliance that helped homeowners after the mortgage crisis. He was succeeded by Timothy Geithner. After leaving government, he took a position at the Paul H. Nitze School of Advanced International Studies at Johns Hopkins University in Baltimore, Maryland. In February 2010, Paulson published a memoir entitled On the Brink: Inside the Race to Stop the Collapse of the Global Financial System.

Further Reading

1 

Paulson, Henry M. On the Brink: Inside the Race to Stop the Collapse of the Global Financial Crisis. New York: Hachette, 2010. Print.

2 

Sorkin, Andrew Ross. TooBig to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves. New York: Penguin, 2009. Print.

3 

Zuckerman, Gregory. The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History. New York: Crown, 2009. Print.

Citation Types

Type
Format
MLA 9th
Tunstall, Lee. "Paulson, Henry." The 2000s in America, edited by Craig Belanger, Salem Press, 2013. Salem Online, online.salempress.com/articleDetails.do?articleName=2000_0292.
APA 7th
Tunstall, L. (2013). Paulson, Henry. In C. Belanger (Ed.), The 2000s in America. Salem Press.
CMOS 17th
Tunstall, Lee. "Paulson, Henry." Edited by Craig Belanger. The 2000s in America. Hackensack: Salem Press, 2013. Accessed September 18, 2025. online.salempress.com.