Treasury chief nominated

Bush picks Paulson, Goldman's chairman, as replacement for Snow

May 31, 2006|By JOEL HAVEMANN | JOEL HAVEMANN,LOS ANGELES TIMES

WASHINGTON -- President Bush accepted the long-expected resignation of Treasury Secretary John W. Snow yesterday and nominated a high-powered Wall Street figure, Goldman Sachs Chairman Henry M. Paulson Jr., to replace him.

Snow became the top-ranking official to leave the administration in a midterm shuffle that began when White House budget director Joshua Bolten became chief of staff two months ago. Snow joined CIA Director Porter J. Goss and White House press secretary Scott McClellan on the list of former administration officials.

Bush, at a brief White House ceremony, praised Paulson for his experience with financial markets and said he would be "my principal adviser" on economic policy. "Hank shares my philosophy that the economy prospers when we trust the American people to save, spend and invest their money as they see fit," the president said.

But it was unclear how much Paulson would shape administration policy. Bush's first Treasury secretary, Paul H. O'Neill, was frustrated that he did not have much influence. Snow found himself cast as a cheerleader for economic policies that were largely forged in the White House rather than at the Treasury Department.

Despite his Wall Street credentials, Paulson, who is also chief executive of Goldman Sachs, a New York investment bank, received a rude welcome from investors. The Dow Jones industrial average tumbled 184 points, though for reasons unrelated to the nomination.

Paulson, 60, seemed on track to win Senate confirmation, as even Democrats rallied to his side.

Sen. Charles E. Schumer, the New York Democrat, praised his "deep understanding" of economic issues and called him "the best pick America could have hoped for."

But Paulson's nomination also attracted some critics. One group said Paulson, like Snow before him, would find himself relegated to the role of promoter of White House economic policies.

The administration, said Peter Schiff, president of Euro Pacific Capital, a Connecticut brokerage, hopes "to tap into Wall Street's legendary ability to put lipstick on a financial pig."

Paulson follows in the path of Robert E. Rubin, who left the chairmanship of Goldman Sachs in 1993 to become an economic adviser to President Bill Clinton and was promoted to Treasury secretary two years later.

Rubin, who presided over a period in which the federal budget moved into surplus for the first time in three decades, is widely regarded as the most effective recent secretary.

Circumstances may make it difficult for Paulson to play this kind of role. James Glassman, an economist at JPMorgan Chase Securities, said the role of Treasury secretary in the current climate is "very limited."

Paulson will take over with barely more than two years left in the Bush administration, and the final years of an administration are often lacking in accomplishment.

"With the economy doing fairly well, it's not clear there's any need for anything major" such as new tax cuts or increases, Glassman said. "It really may be more public relations, sort of getting-the-message-out idea, that's most critical."

Paulson received $30 million in overall compensation from Goldman Sachs in 2004.

Not all analysts believe the economy is doing so well. Schiff said Americans, by spending more than they save, are like dieters who gorge on chocolate and wonder why they don't lose weight.

"The day of reckoning is at hand," he said, "and there's nothing the Treasury secretary can do about it," at least not while the administration favors policies that spend more than they collect in tax revenue.

Snow left the Treasury secretary's job in much the same style that he has filled it since February 2003 - as a pitchman for Bush's economic policies.

"Your economic policies have put the American economy on a strong upward path," he told Bush at the White House ceremony. "And I've been pleased to have had a part in working with you to advance those policies."

Snow had been rumored for involuntary departure from the Treasury Department ever since Bush won re-election in November 2004.

He held on to the job with unflinching public loyalty to administration economic policies. Last year he served as a major advocate of the administration's unsuccessful proposal to divert some Social Security payroll taxes to personal retirement accounts.

Snow, who was chairman and chief executive of railroad company CSX Corp. before becoming Treasury secretary, "will enjoy not being ordered around so much," said a knowledgeable government official who asked not to be quoted on personnel matters.

Snow, 66, had offered to resign since long before Bolten was appointed to be Bush's chief of staff, signaling the advent of a broader administration shake-up.

But Bush, asked about Snow at a news briefing Thursday, said the two had not talked about resignation.

Snow has not set a departure date and plans to attend the G-8 meeting of the heads of the seven major industrial countries and Russia in St. Petersburg in July.

Joel Havemann writes for the Los Angeles Times.

Henry "Hank" Merritt Paulson Jr.

Born

March 28, 1946, in Palm Beach, Fla.

Experience

Worked on President Richard M. Nixon's White House domestic council as staff assistant, 1972-1973. Worked at the Pentagon, 1970-1972. Joined Goldman Sachs in 1974 and became a director in August 1998. Became chairman and chief executive officer in May 1999. Heads Nature Conservancy's board of directors.

Education

B.A. in English, Dartmouth College, 1968; M.B.A., Harvard University, 1970.

Family

wife, Wendy; children Henry Merritt Clark III and Amanda Clark.

[Associated Press]

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