Who is Henry Paulson?
Henry Paulson, the 74th Secretary of the U.S. Treasury, served under President George W. Bush between July 2006 and January 2009. Before his tenure as Secretary of the Treasury, Henry “Hank” Paulson, Jr. worked for Goldman Sachs for 32 years, including his time as the chair and chief executive officer. Paulson is best known for leading the response to the 2008 financial crisis while serving as the of Secretary of the Treasury.
Understanding Henry Paulson
Henry Paulson was a successful American banker prior to his stint in public service. Paulson earned his undergraduate degree from Dartmouth and his MBA from Harvard Business School. He began his career on the White House Domestic Council as a staff assistant between 1970 and 1973. Paulson then joined Goldman Sachs in 1974. He became Goldman’s chair and CEO in 1999 when the firm went public and held those roles until he became Treasury Secretary. Paulson's time at Goldman Sachs was notable for the connections he forged with China - a country that he recognized early on was well on its way to becoming an economic powerhouse.
- Henry Paulson served as the Treasury Secretary in the Bush administration during the 2008 financial crisis.
- Paulson led the U.S. response to the financial crisis along with Ben Bernanke, the Federal Reserve chair at the time.
- Paulson helped design the massive bailout package used to purchase the mortgage-backed securities and ensure the survival of the banking system.
Paulson's successful career in banking has, however, been almost entirely overshadowed by the fact that he joined the Bush administration as Treasury Secretary a year before an unprecedented financial market meltdown. Paulson, along with Federal Reserve Chair Ben Bernanke, spearheaded the efforts to keep the U.S. economy functioning as the 2008 financial crisis wreaked havoc.
Henry Paulson's and the 2008 Financial Crisis
The 2008 financial crisis is still considered the worst economic disaster since the Great Depression of 1929. The root of it has not been traced to one single event or cause. Instead, it was the result of a sequence of events, each with its triggering mechanism, which led to near-collapse of the banking system. As there was no set playbook to pull from as far as a policy response, Paulson and Bernanke attempted to walk a fine line where some institutions such as Lehman Brothers were allowed to fail while others like Bear Stearns and Merrill Lynch were saved through acquisitions undertaken with tacit support from the U.S. government.
Paulson was instrumental in implementing the Troubled Asset Relief Program (TARP) and the AIG bailout, as well as getting toxic mortgage-based assets off banks’ balance sheets. He used unprecedented government intervention efforts to avoid a larger economic crisis, helping to create the $168 billion economic stimulus package.
Like Bernanke, Paulson has been criticized for his response to the financial crisis from all sides. Some have pointed to Lehman Brothers as a major mistake that led directly to a worsening of the crisis. The argument goes that, if Paulson had done more for Lehman Brothers, then less drastic actions would have been needed later on. There are, of course, many other critics that feel Paulson did far too much to support institutions that should have had a finer sense of moral hazard.
Paulson’s Career After Public Service
Though his dealings with the financial crisis color Paulson's time as Treasury Secretary, he also helped improve U.S. economic relations with China during his tenure. Also, he 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 spearheaded 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.
After leaving the Treasury Department, he became chair and founder of The Paulson Institute at the University of Chicago in 2011. The Paulson Institute is a think tank focused on sustainable economic growth and preserving the natural environment in the United States and China. Paulson is also an author with three published books, including Firefighting: The Financial Crisis and Its Lessons, a 2019 book he co-authored with Ben Bernanke and Timothy Geithner.