Henry Paulson is regarded as a successful American banker and civil servant. As U.S. Secretary of the Treasury under President George W. Bush, Paulson is best known for spearheading efforts to support the United States economy during the 2008 financial crisis.
He is the author of five books, including On The Brink: Inside The Race To Stop The Collapse Of The Global Financial System and Dealing with China: An Insider Unmasks the New Economic Superpower.
- Henry Paulson served as U.S. Treasury Secretary during the 2008 financial crisis.
- He co-authored Firefighting: The Financial Crisis and its Lessons with Ben Bernanke and Timothy Geithner.
- Paulson was instrumental in implementing the Troubled Assets Relief Program (TARP).
Early Life and Education
Henry "Hank" M. Paulson Jr. was born in Palm Beach, Florida, and raised in Barrington, Illinois. He earned a bachelor's degree in English from Dartmouth College in 1969 and an MBA from Harvard Business School in 1970. Paulson began his career on the White House Domestic Council as a staff assistant before joining Goldman Sachs in 1974, where he would remain for 32 years and earn the roles of chairman and CEO.
Nominated by President George W. Bush on June 19, 2006, and confirmed by the Senate on June 28, 2006, Henry Paulson was sworn into office on July 10, 2006, as the 74th U.S. Secretary of the Treasury. In his role, Paulson acted as the President's leading policy advisor on a broad range of domestic and international economic issues, most notably the 2008 financial crisis.
On Wednesday, Feb. 7, 2007, just seven months into Henry Paulson's tenure, HSBC Bank USA announced losses linked to U.S. subprime mortgages. This event signaled the beginning of what became the 2008 financial crisis, regarded as the worst economic disaster since the Great Depression of 1929. As months passed, and defaults grew, Paulson would take a wait-and-see approach, attributing the trouble to a correction within the housing market. From hedge funds at Bear Sterns to insurance giants like AIG, all players in the financial industry held a piece of the looming losses. Henry Paulson, along with Federal Reserve Chair, Ben Bernanke, would create a series of bailouts and rescue packages to temper the growing crisis.
Too Big to Fail
In their book, Firefighting: The Financial Crisis and its Lessons, Paulson, Bernanke, and Timothy Geithner, New York's Federal Reserve chair in 2008, wrote, "Epic financial infernos don’t happen often. Usually, turmoil in financial markets burns itself out. Markets adjust, firms fail, and life goes on. Sometimes, financial fires get so serious that policymakers need to help put them out."
In March 2008, Paulson oversaw the merger of Bear Stearns with JPMorgan Chase, a deal delivered with $29 billion of government financing for Bear Stearns’ troubled assets. In this major play by the U.S. Treasury to curb the financial crisis, public criticism of Henry Paulson and Ben Bernanke grew. The Republican right-wing was averse to any tampering with the free market, and the Democratic left was outraged by the government rescue of Wall Street’s overpaid elite.
But when Lehman Brothers, a major underwriter of subprime mortgage-backed securities, declared bankruptcy on Sept. 15, 2008, without government intervention, markets responded. Lehman's collapse affected global financial markets for weeks.
Before the end of 2008, Henry Paulson would oversee the nationalization of mortgage giants Fannie Mae and Freddie Mac, support Bank of America as it absorbed Merrill Lynch, provide an $85 billion government rescue package to insurer AIG, institute government guarantees for more than $3 trillion worth of money market funds, and gain congressional approval of a $700 billion arsenal of government support for the entire financial system.
The U.S. Treasury, under Paulson, established several programs under the Troubled Assets Relief Program (TARP). The program began in 2008 and ended in 2010. During its active two years, TARP helped prevent the collapse of the American auto industry, restart the secondary credit markets to keep credit flowing to households and businesses, and stabilize the U.S. banking system following the 2008 financial crisis.
The Paulson Institute
Henry Paulson, as U.S. Treasury Secretary, helped improve U.S. economic relations with China during his tenure. He also worked to modernize the system for issuing U.S. Treasury bonds (T-Bonds), helped enhance the national security review process to spur foreign investment in the United States, and launched a program to fight the funding of terrorist groups. Paulson also worked to improve the United States’ trading relationships with Panama, Colombia, South Korea, and Peru.
At the end of his tenure with the Treasury Department, Paulson founded The Paulson Institute at the University of Chicago in 2011. Focused on sustainable economic growth and preserving the natural environment in the United States and China, the Paulson Institute is a think tank and learning center.
How Did Henry Paulson Effect Policies With China During His Tenure As Treasury Secretary?
As Treasury Secretary, Paulson created the Strategic Economic Dialogue with China, a framework for managing a bilateral economic relationship on a long-term strategic basis.
What Is Henry Paulson's View of Regulations in Banking Industry?
Henry Paulson has often proposed an increase in regulations to prevent further financial crises. He has suggested that "a regulator can step in and has the power to liquidate an institution, to liquidate and let it fail in a manner so that it doesn't hurt the American people."
What Is "Straight Talk With Henry Paulson"?
Straight Talk with Henry Paulson is a series of podcasts initiated as part of the Paulson Institute. Henry Paulson speaks with leaders and educators around the globe in his series.
The Bottom Line
As U.S. Treasury Secretary from 2006 to 2009, Henry Paulson oversaw and implemented steps to improve the economic situation in the United States and globally during the 2008 financial crisis.