Paulson: Right Man for the Job

The past year gave Henry "Hank" Paulson plenty of time to come to terms with his nerve-jolting experience as 74th secretary of the U.S. Treasury, in the days when the world edged toward financial meltdown.

My impression of Paulson, whom I recently interviewed for the seventh time since 1997, is that he hasn't changed one bit. Post-crisis and since leaving office with former President George W. Bush in early 2009, Paulson's nerves are strong, his manner is still direct, and his hoarse voice has relinquished none of its commanding power.

Our photo editor declared "he's here" when Paulson arrived for the interview April 4 at the Grand Hyatt Hotel on Chang'an Avenue in Beijing. I looked up and saw a tall, tanned, energetic man standing at the door.

Back in 1997, when investment banking was still a foreign idea for many in China, we interviewed Paulson in his capacity as COO of Goldman Sachs at the firm's Beijing office. He impressed me.

Before the end of the year, Goldman Sachs and China's first, homegrown investment bank China International Capital Corp. had jointly underwritten the initial public offering for China Telecom, ushering in China's international investment bank era.

Our second encounter was in the headquarters of Goldman Sachs in New York. I met Paulson along with then-CEO Jon Corzine. Known on Wall Street as a tough manager, Paulson became co-president with Corzine before taking full control of the firm in 1999.

Toughness served Paulson well as Treasury secretary, and may explain why he looked every bit in control during our latest interview at the Beijing Hyatt. "Looking back," he told me, "I am glad I was there" when the crisis broke out. "I think my experience in financial markets and the fact that I am decisive by nature allowed me to make a difference."

My third interview with Paulson was in Hong Kong in 1998. That was against the backdrop of a financial crisis of a different sort: the Asian Financial Crisis.

Wang Qishan, now China's vice premier, at the time was the standing deputy governor of Guangdong, a province troubled by titanic, government-backed investment companies. Wang directed the restructuring of Yuehai, a company that once served as Guangdong's investment arm in Hong Kong and almost collapsed.

Wang signed up Goldman Sachs as a financial consultant. The deal wasn't the biggest fish on Paulson's plate, but he flew to Hong Kong to sign the contract and showed support by taking an extra step – by investing US$ 20 million in Yuehai.

Wall Street's reputation was tainted after the Enron scandal. In June 2002, Paulson delivered a powerful speech at the National Press Club in Washington, calling for financial accounting reform, improvements to corporate governance standards, and preventing conflicts of interest at investment banks. Three days later, the New York Stock Exchange unveiled a reform plan with several points mirroring Paulson's comments.

That same week, Paulson again allowed me to interview him in Beijing to explain Wall Street's new rule book.
 
Goldman Sachs made several inroads into China's financial markets in 2004, setting up the nation's first joint, domestic-international securities firm, Goldman Sachs Gaohua. That gave us an opportunity for another discussion.

Paulson hung his picture on a Treasury Department wall in 2006, alongside framed photos of the president and vice president. Accepting an appointment as U.S. Treasury secretary, he said in his recently published book, was difficult. Nevertheless, he had plenty of supporters, including Zhou Xiaochuan, China's central bank governor.

As an experienced China hand, Paulson used his position to set up the Strategic Economic Dialogue (SED), drawing together high-level U.S. and Chinese officials twice a year to debate and work on bilateral issues. Prior to the second SED in Washington in 2007, I interviewed Paulson in his Treasury office. He was cautious, weighing each word carefully based on its possible influence for bilateral ties. "No image on the cover (of the magazine)," his press secretary told us after the conversation.

No one could have envisioned that a full-fledged financial crisis would engulf the world less than two years later, putting Paulson in the eye of the storm.

In retrospect, he told me during our latest meeting in Beijing – coincidentally, a stormy afternoon – that he has no regrets. In his trademark husky voice, Paulson said, "I do believe that, working with imperfect authorities and tools, facing some unprecedented challenges, the major decisions we made were the right ones."