President Bush Monday named a respected Wall Street investment banker, Henry Paulson, to succeed John Snow as secretary of the treasury.
Paulson is one of Wall Street's most successful financiers. He has been the head of Goldman Sachs, America's premiere brokerage firm, since 1999. A graduate of Dartmouth and Harvard Business School, Paulson, 60, has specialized in foreign exchange and advised clients on numerous corporate takeovers. He earned $38 million last year and will take a huge salary cut as the treasury secretary is paid less than $200,000 per year.
Traditionally, the treasury secretary has responsibility for formulating economic policy. During the early years of the Bush administration that role shifted to the White House, a change that complicated the job of Mr. Bush's first treasury secretary, Paul O'Neill. O'Neill, former head of the Alcoa Aluminum Company, got into trouble for his outspoken views and was dismissed in 2002. His successor, railroad executive John Snow, lasted three years but never won the full support of Mr. Bush's top advisers.
"Certainly, John Snow's main job was selling the economy and selling the macro policy of the Bush administration. And I can't imagine that there is going to be a fundamental shift here where suddenly the treasury secretary becomes the main driver of economic policy," said Ethan Harris, an economist at Lehman Brothers brokerage in New York.
Paulson, who must be confirmed by the Senate, has been a strong advocate of increased business relations with China. During his career, he has traveled to China 70 times. Bear Stearns London Currency trader Steven Barrow says Paulson is likely to pursue the Bush administration's drive for a revaluation of China's currency. "Of course, most of the time John Snow has been in office the dollar has fallen. And I think we will see more of that. But really the emphasis has to be against which currencies should the dollar fall? Of course, Snow's pressure in the last year or so has been on China in particular and getting more flexibility there, meaning really more dollar weakness," he said.
Many economists advocate a weaker dollar as a means of redressing America's huge trade deficit.
In coming to Washington as treasury secretary, Paulson is following in the footsteps of Robert Rubin, who headed Goldman Sachs in the early 90s. Rubin won high marks during the four years he served as treasury secretary under President Clinton.