Henry Paulson

Henry Merritt "Hank" Paulson Jr. (born March 28, 1946) is an American investment banker, financier, conservationist, and former government official who served as the 74th United States Secretary of the Treasury from 2006 to 2009 under President George W. Bush. Before entering government, Paulson was the chairman and chief executive officer of Goldman Sachs, one of the world's most powerful investment banks, where he built a reputation as one of Wall Street's most influential executives and a pioneer in U.S.-China business relations.

Paulson's tenure as Treasury Secretary coincided with the 2007-2008 financial crisis, the worst economic catastrophe since the Great Depression. He became the architect of the federal government's response, orchestrating the $700 billion Troubled Asset Relief Program (TARP) that bailed out failing banks, nationalizing Fannie Mae and Freddie Mac, and overseeing the controversial decisions to rescue AIG while allowing Lehman Brothers to fail. His role in these events made him one of the most consequential - and controversial - Treasury Secretaries in American history.

Nicknamed "Mr. Bailout" by critics, Paulson faced intense scrutiny for potential conflicts of interest given Goldman Sachs' substantial benefit from the bailout programs he designed. Supporters credited him with preventing a complete collapse of the global financial system, while critics argued that he socialized Wall Street's losses while protecting the banks and executives who caused the crisis. Time magazine named him a runner-up for Person of the Year in 2008, calling him "the face" of the financial debacle.

Since leaving government, Paulson has focused on U.S.-China relations and environmental conservation. He founded the Paulson Institute in 2011 to promote sustainable economic growth and cleaner environments, and serves as executive chairman of TPG Rise Climate. A lifelong birder and Christian Scientist, he has pledged his entire fortune to conservation causes upon his death.

Early life and education

Family background

Henry Merritt Paulson Jr. Was born on March 28, 1946, in Palm Beach, Florida, to Marianne Gallauer and Henry Merritt Paulson, a wholesale jeweler. Despite his Florida birthplace, Paulson was raised on a farm in Barrington, Illinois, a suburb of Chicago. The family's heritage includes Norwegian, German, and English Canadian ancestry.

Paulson was raised as a Christian Scientist, a faith he has maintained throughout his life. In 2016, his wife Wendy expressed the importance of Christian Science teaching in their lives. The rural Illinois upbringing and religious background instilled in Paulson values of hard work, self-reliance, and stewardship that would later manifest in both his business career and his passionate commitment to environmental conservation.

Eagle Scout

As a youth, Paulson was active in the Boy Scouts of America, ultimately attaining the rank of Eagle Scout - the highest achievement in American Scouting. He later received the Distinguished Eagle Scout Award, given to Eagle Scouts who have demonstrated outstanding achievement in their careers. The Scouting experience, with its emphasis on service, leadership, and connection to nature, helped shape Paulson's character and his later commitment to conservation.

High school athlete

Paulson attended Barrington High School, where he excelled as an athlete, participating in wrestling and football. His athletic ability and competitive drive foreshadowed the intensity he would later bring to Wall Street. He graduated from Barrington in 1964.

Dartmouth College

Paulson enrolled at Dartmouth College, the Ivy League institution in Hanover, New Hampshire, where he majored in English. At Dartmouth, he continued his athletic career as a football player, earning recognition as an All-Ivy, All-East, and honorable mention All-American as an offensive lineman. He was also a member of the Sigma Alpha Epsilon fraternity.

Academically, Paulson excelled, graduating Phi Beta Kappa in 1968 - one of the highest academic honors available to American undergraduates. Following graduation, he was offered a prestigious scholarship to study at the University of Oxford but chose not to accept it, instead pursuing graduate business education in the United States.

Harvard Business School

Paulson received his Master of Business Administration degree from Harvard Business School in 1970, completing one of the most prestigious business programs in the world. The MBA provided the formal training in finance and management that would support his rise at Goldman Sachs, though Paulson often emphasized that his success derived as much from competitive drive and relationship-building as from technical expertise.

Early career

Pentagon and Nixon administration

After completing his MBA, Paulson entered government service rather than immediately joining Wall Street. From 1970 to 1972, he served as Staff Assistant to the Assistant Secretary of Defense at the Pentagon, gaining his first experience with the federal bureaucracy and national security policy.

From 1972 to 1973, Paulson worked in the administration of President Richard Nixon, serving as assistant to John Ehrlichman, the influential domestic policy advisor. This position placed Paulson at the center of power in the Nixon White House during the early stages of the Watergate scandal. While Paulson departed before Watergate's climax, his time in the Nixon administration provided valuable experience in navigating Washington's political landscape - experience that would prove essential during the 2008 financial crisis.

Goldman Sachs career

Joining the firm

In 1974, Paulson joined Goldman Sachs, beginning a three-decade career at one of Wall Street's most prestigious and powerful institutions. He started in the firm's Chicago office under James P. Gorter, covering large industrial companies in the Midwest. The Chicago assignment was unusual for an ambitious Goldman banker - the firm's power center was in New York - but it allowed Paulson to develop deep relationships with major corporations in America's industrial heartland.

Rise to partnership

Paulson became a partner at Goldman Sachs in 1982, joining the elite group of executives who shared in the firm's profits and governance. Partnership at Goldman was among the most coveted achievements on Wall Street, signifying not just financial success but admission to an exclusive club that wielded enormous influence over American business.

From 1983 until 1988, Paulson led the Investment Banking group for the Midwest Region, cementing his reputation as a skilled dealmaker with strong corporate relationships. In 1988, he was named managing partner of the Chicago office, the senior Goldman executive in the Midwest.

National leadership

Paulson's success in Chicago led to increasingly prominent national roles. From 1990 to November 1994, he served as co-head of Investment Banking, overseeing one of Goldman's most profitable businesses. In December 1994, he was named Chief Operating Officer (COO), making him one of the top executives at the firm and the likely successor to CEO Jon Corzine.

Becoming CEO

In 1999, Paulson succeeded Jon Corzine as chairman and chief executive officer of Goldman Sachs. The transition came during a turbulent period - Goldman had just completed its initial public offering, ending more than a century as a private partnership, and the firm was navigating the late stages of the dot-com bubble.

Under Paulson's leadership, Goldman Sachs solidified its position as Wall Street's most profitable and prestigious firm. The bank dominated mergers and acquisitions advisory work, built powerful trading operations, and expanded globally. Goldman's culture of intense competition and unrelenting pursuit of profit was both admired and feared throughout the financial industry.

Compensation and wealth

Paulson was one of the highest-paid executives in American business during his tenure at Goldman Sachs. His compensation package was reportedly $37 million in 2005 and $16.4 million projected for 2006. Over his career at Goldman, Paulson earned an estimated $480 million in total compensation.

By the time he left Goldman for the Treasury Department, Paulson's net worth was estimated at over $700 million, with his Goldman Sachs stock holdings alone valued at approximately $600 million. This wealth, accumulated through decades of service to one of Wall Street's most successful firms, would later become a source of controversy when Paulson oversaw policies that benefited Goldman during the financial crisis.

Building U.S.-China relations

One of Paulson's most significant achievements at Goldman Sachs was building the firm's presence in China. During his career at Goldman, Paulson visited China more than 70 times, developing what The Daily Telegraph described as "intimate relations with the Chinese elite." These relationships would later inform his work as Treasury Secretary and his post-government focus on U.S.-China relations.

Paulson recognized earlier than many Western executives that China's economic rise would transform global business. Goldman Sachs under his leadership positioned itself as a crucial intermediary between Chinese companies seeking to access international capital markets and Western investors looking for exposure to Chinese growth.

Conservation at Goldman

Even while running one of Wall Street's most hard-charging firms, Paulson maintained his commitment to environmental conservation. During his tenure as CEO, Goldman Sachs made a remarkable corporate donation of 680,000 acres (2,800 km²) on the forested Chilean side of Tierra del Fuego. The donation drew criticism from some Goldman shareholder groups, who questioned whether corporate assets should be used for conservation, but it demonstrated Paulson's willingness to use his position for causes he believed in.

Secretary of the Treasury

Nomination and confirmation

On May 30, 2006, President George W. Bush nominated Paulson to succeed John Snow as Secretary of the Treasury. The nomination was widely praised on Wall Street and in Washington, where Paulson was seen as bringing exceptional private-sector experience to the job.

On June 28, 2006, the United States Senate confirmed Paulson unanimously - a rare show of bipartisan support that reflected his reputation as a competent, non-ideological executive. He was sworn in on July 10, 2006, at a ceremony held at the Treasury Department.

Stock sale controversy

Before becoming Treasury Secretary, Paulson was required to liquidate all of his stock holdings in Goldman Sachs, valued at over $600 million in 2006, in order to comply with conflict of interest regulations. In July 2006, Paulson sold 3.23 million shares of Goldman in a public sale. At Goldman's $152 share price, the sale generated approximately $491 million.

Remarkably, thanks to a tax provision passed under President George H. W. Bush, Paulson was able to defer his capital gains tax on the sale, saving himself an estimated $50 million (some estimates suggest $200-250 million). This provision, designed to encourage people to leave lucrative private-sector jobs for government service, allowed Paulson to avoid taxes that ordinary Americans would have owed on similar gains.

The tax-free sale would later become a source of criticism, particularly after Paulson oversaw bailouts that benefited Goldman Sachs. Critics argued that Paulson had been able to cash out his Goldman fortune without paying taxes before implementing policies that protected his former firm.

Pre-crisis optimism

In his early tenure as Treasury Secretary, Paulson delivered optimistic assessments of the economy that would later prove embarrassingly wrong. In April 2007, he said growth was healthy and the housing market was "at or near the bottom." He declared the U.S. Economy "very healthy" and "robust."

In August 2007, as the subprime mortgage crisis began to emerge, Paulson explained that "U.S. Subprime mortgage fallout remained largely contained due to the strongest global economy in decades." These statements, made as the housing bubble was beginning to burst, would be used by critics to argue that Paulson and other officials failed to anticipate the crisis.

U.S.-China Strategic Economic Dialogue

Paulson used his extensive China relationships to create the U.S.-China Strategic Economic Dialogue, a forum through which the two countries addressed areas of immediate and long-term strategic and economic interest. The initiative represented the most comprehensive framework for U.S.-China economic coordination to that point.

In spring 2007, Paulson spoke at the Shanghai Futures Exchange, warning that China needed to liberalize its capital markets to avoid losing potential economic growth. "An open, competitive, and liberalized financial market can effectively allocate scarce resources in a manner that promotes stability and prosperity far better than governmental intervention," he said.

The irony of this statement would become apparent the following year, when Paulson orchestrated massive government interventions to stabilize the U.S. Financial system. When the U.S. Needed to issue huge volumes of bonds to fund these interventions, it relied on China - by then the largest holder of U.S. Debt - to purchase them.

The 2008 financial crisis

Bear Stearns rescue

The first major crisis of Paulson's tenure came in March 2008, when Bear Stearns, a major investment bank, faced imminent collapse. The firm had made enormous bets on mortgage-backed securities that were rapidly losing value, and it could no longer fund its day-to-day operations.

Working with Federal Reserve Chairman Ben Bernanke, Paulson orchestrated a rescue that saw JPMorgan Chase acquire Bear Stearns with $29 billion in Federal Reserve backing. The deal was controversial - Bear Stearns shareholders initially received just $2 per share, later revised to $10, for a company that had traded as high as $171 the previous year.

The Bear Stearns rescue established a crucial precedent: the government would intervene to prevent the failure of a major financial institution deemed "too big to fail." This precedent would shape expectations throughout the remainder of the crisis - with fateful consequences.

Fannie Mae and Freddie Mac

On August 10, 2008, Paulson told NBC's Meet the Press that he had no plans to inject capital into Fannie Mae or Freddie Mac, the government-sponsored enterprises that guaranteed or owned roughly half of all American mortgages. Less than a month later, on September 7, 2008, both companies were placed into government conservatorship - effectively nationalized.

The decision to take over Fannie and Freddie was one of the largest government interventions in the history of American finance. Paulson argued that the action was necessary to prevent a complete collapse of the mortgage market, which would have devastated the broader economy. The government ultimately invested approximately $188 billion in the two companies.

Lehman Brothers bankruptcy

The most controversial decision of Paulson's tenure came on September 15, 2008, when Lehman Brothers, the fourth-largest investment bank in the United States, filed for Chapter 11 bankruptcy - the largest bankruptcy in American history, with over $600 billion in assets.

Unlike with Bear Stearns, the government did not provide financial support to enable Lehman's rescue. Paulson and Timothy Geithner, then president of the Federal Reserve Bank of New York, attempted to facilitate a private-sector solution, encouraging Barclays and other potential buyers to acquire Lehman. When British regulators blocked Barclays from completing a deal without government guarantees, and no other buyer emerged, Lehman was allowed to fail.

Paulson later explained the decision by noting that the government lacked legal authority to bail out Lehman because Congress had not yet authorized TARP, and no federal regulator like the FDIC could take over an investment bank. He stated: "We didn't have TARP with Lehman Brothers."

The decision to let Lehman fail triggered a global financial panic. Credit markets froze, stock markets plunged, and the crisis that had been building for over a year exploded into a full-scale meltdown. Whether allowing Lehman to fail was a catastrophic error or an unavoidable consequence of legal constraints remains debated by economists and policymakers.

AIG bailout

Just one day after Lehman's bankruptcy, on September 16, 2008, the Federal Reserve announced an $85 billion loan to American International Group (AIG), the giant insurance company that had written hundreds of billions of dollars in credit default swaps on mortgage-backed securities.

The decision to rescue AIG while allowing Lehman to fail appeared inconsistent and confused markets. Paulson defended the distinction by noting that AIG's debts "were secured by the underlying insurance business," making it a more viable bailout candidate than Lehman, which faced a pure liquidity crisis. AIG, he noted, held "teacher pension plans, 401k plans, $1.5 trillion in life insurance plans for Americans," and the French Finance Minister had called to explain that AIG held the interests of many Eurozone countries.

The AIG bailout proved enormously controversial. Goldman Sachs was among the largest beneficiaries of the rescue, receiving an estimated $12.9 billion in payments from AIG - funds that came directly from taxpayers. Critics pointed to Paulson's Goldman background as evidence of improper favoritism.

TARP and the $700 billion bailout

On September 19, 2008, four days after Lehman's bankruptcy, Paulson proposed a sweeping rescue plan that would eventually become the Troubled Asset Relief Program (TARP). The initial proposal requested authority for the Treasury to use $700 billion to purchase "troubled assets" - primarily mortgage-backed securities - from financial institutions.

Paulson's original proposal was remarkably broad, granting the Treasury Secretary essentially unlimited discretion over how to deploy the funds. Controversially, the initial draft exempted Paulson's decisions from judicial oversight - a provision that outraged members of Congress and was removed from the final legislation.

The proposal faced initial rejection in the House of Representatives on September 29, 2008, triggering a nearly 800-point drop in the Dow Jones Industrial Average. After intense lobbying by President Bush and revisions to the legislation, Congress passed the Emergency Economic Stabilization Act of 2008 on October 3, 2008, creating TARP and granting Paulson the authority he sought.

Capital injections

After TARP's passage, Paulson shifted strategy. Rather than purchasing troubled assets as originally proposed, he decided to inject capital directly into banks by purchasing preferred stock. Working with Bernanke, Geithner, and Sheila Bair of the FDIC, Paulson convened the CEOs of nine major banks on October 13, 2008, and essentially required them to accept government investments.

The capital injections were structured with terms Paulson himself acknowledged were meant to be "punitive" - the government took non-voting shares and received dividends of 5% initially, rising to 9% until the banks repaid. The terms were designed both to protect taxpayers and to encourage banks to exit the program as quickly as possible.

Assessment

Time magazine named Paulson a runner-up for its 2008 Person of the Year, saying "if there is a face to this financial debacle, it is now his..." while concluding that "given the... Realities he faced, there is no obviously better path [he] could have followed."

The documentary film Inside Job named Paulson as one of the "25 People to Blame for the Financial Crisis," arguing that he and other officials failed to prevent the crisis and then protected Wall Street at taxpayer expense.

TARP ultimately proved less costly than initially feared. The program recovered $441.7 billion from $426.4 billion invested, earning a $15.3 billion profit for taxpayers. However, critics argued this accounting ignored the broader costs of the crisis - the millions of jobs lost, homes foreclosed, and lives disrupted.

Conflicts of interest controversy

Goldman Sachs connections

Throughout the financial crisis, Paulson faced intense criticism for potential conflicts of interest arising from his Goldman Sachs background. Goldman Sachs was among the largest beneficiaries of the government's crisis response:

• Goldman received $12.9 billion from AIG - the largest single payout from the rescue - representing 100 cents on the dollar for credit default swaps that might have become worthless if AIG had failed
• Goldman was approved to become a bank holding company, gaining access to Federal Reserve emergency lending facilities
• Goldman received $10 billion in TARP funds (later repaid with profit to taxpayers)

Critics pointed out that Paulson had hired Goldman executives as advisors at Treasury and that the original TARP proposal would have given him unprecedented discretion to direct funds without oversight. The perception that Wall Street insiders were bailing out their friends with taxpayer money fueled public outrage that would later manifest in movements like Occupy Wall Street and the Tea Party movement.

Defenders' arguments

Paulson's defenders noted that he had sold all his Goldman stock before taking office and had no direct financial interest in the firm's success. They argued that Goldman's benefit from the crisis response was incidental to the broader goal of stabilizing the financial system, and that allowing major banks to fail would have harmed ordinary Americans far more than any perceived favoritism helped Wall Street.

Post-government career

Johns Hopkins fellowship

After leaving the Treasury Department in January 2009, Paulson spent a year at the Paul H. Nitze School of Advanced International Studies at Johns Hopkins University as a distinguished visiting fellow. He was also a fellow at the university's Bernard Schwartz Forum on Constructive Capitalism. This academic interlude allowed him to reflect on his crisis experience and begin writing his memoirs.

The Paulson Institute

On June 27, 2011, Paulson announced the formation of the Paulson Institute, which he described as a non-partisan, independent "think and do tank" dedicated to fostering U.S.-China relations and promoting sustainable economic growth. He was simultaneously named a senior fellow at the University of Chicago's Harris School of Public Policy.

The Paulson Institute has focused on areas including sustainable urbanization in China, cross-border investment between the U.S. And China, and conservation. It represents Paulson's effort to use relationships and expertise to address what he sees as the most important bilateral relationship of the 21st century.

TPG Rise Climate

Paulson serves as executive chairman of TPG Rise Climate, a global fund focused on climate change investments. The position reflects his increasing focus on environmental issues and the intersection of finance and sustainability.

Books

Paulson has authored three books since leaving government:

• On the Brink: Inside the Race to Stop the Collapse of the Global Financial System (2010): His memoir of the 2008 financial crisis, providing a detailed account of the decisions made during those tumultuous months

• Dealing with China: An Insider Unmasks the New Economic Superpower (2015): An account of his career working with China's political and business leaders and witnessing the evolution of China's state-controlled capitalism. The book was selected by Mark Zuckerberg for his book club

AIG lawsuit testimony

On October 6, 2014, Paulson testified in Starr v. United States, the lawsuit filed by Hank Greenberg's Starr International alleging that the government had cheated AIG shareholders by demanding a 79.9% stake in the company. Paulson acknowledged that the terms of the bailout were meant to be "punitive."

"AIG, either fairly or unfairly, ... Became a symbol for all that is bad on Wall Street," Paulson testified. The case ultimately found that while the government's actions were technically unauthorized, no damages were owed because AIG shareholders would have lost everything without the bailout.

Political positions

Despite his Republican background and service in the Bush administration, Paulson has broken with his party on several issues. In April 2016, he joined seven other former Treasury Secretaries in calling on the United Kingdom to remain in the European Union.

In June 2016, Paulson endorsed Hillary Clinton for president and announced support for the Never Trump movement. In an op-ed for The Washington Post, Paulson wrote: "The GOP, in putting Trump at the top of the ticket, is endorsing a brand of populism rooted in ignorance, prejudice, fear and isolationism."

Climate advocacy

Paulson has been increasingly vocal on climate change, a position that sets him apart from many Republicans. He is a leader of the Climate Leadership Council and in 2017 co-authored a carbon tax proposal with other prominent figures including James A. Baker III, Greg Mankiw, Martin Feldstein, George P. Shultz, and others.

Conservation and philanthropy

The Nature Conservancy

Paulson has been a member of The Nature Conservancy for decades, eventually serving as the organization's board chairman and co-chair of its Asia-Pacific Council. In this capacity, he worked with former Chinese President Jiang Zemin to preserve Tiger Leaping Gorge in Yunnan Province - one of the deepest river canyons in the world.

His wife Wendy serves as Chair Emerita of Rare, another major conservation organization. The couple has been described as "nurturing a love for birds and a passion for conservation while birdwatching" together at locations including China's Beidaihe wetlands.

Major donations

Paulson has donated approximately $100 million to conservation causes and has pledged his entire fortune to the same purpose upon his death. This commitment makes him one of the most significant philanthropists in the conservation movement.

The Goldman Sachs donation of 680,000 acres in Chilean Tierra del Fuego during his tenure as CEO remains one of the largest corporate land conservation gifts ever made.

Latin American Conservation Council

In 2011, Paulson founded the Latin American Conservation Council, a group of global business and political leaders working to advance conservation in the region. The council represents his effort to apply his business and political skills to environmental protection.

Risky Business

From 2013 to 2017, Paulson co-chaired the Risky Business project with Michael Bloomberg and Tom Steyer. The non-partisan initiative quantified and publicized the economic risks of climate change, seeking to frame environmental action in terms that business leaders would understand and respond to.

Personal life

Marriage and family

Paulson met his wife, Wendy Judge, during his senior year at Dartmouth. She is a graduate of Wellesley College and shares his passion for nature and conservation. The couple married in 1969 and has two adult children.

Their son, Henry Merritt Paulson III, known as Merritt Paulson, is a sports team owner, having owned the Portland Timbers (Major League Soccer) and Portland Thorns FC (National Women's Soccer League). Their daughter, Amanda Paulson, is a journalist and, like her brother, a Dartmouth graduate. The Paulsons became grandparents in June 2007 and now have four grandchildren.

Residences

The Paulsons maintain homes in both Chicago and Barrington Hills, the suburb where Paulson grew up. Despite his Wall Street career, Paulson has maintained his Midwest roots and connection to the community where he was raised.

Religious faith

Paulson was raised as a Christian Scientist and has maintained this faith throughout his life. His wife has spoken publicly about the importance of Christian Science teaching in their lives.

Cultural depictions

Paulson's role in the 2008 financial crisis has been depicted in several major productions:

• Too Big to Fail (2011): HBO film in which Paulson was portrayed by William Hurt
• The Last Days of Lehman Brothers (2009): BBC film in which Paulson was portrayed by James Cromwell
• Inside Job (2010): Academy Award-winning documentary that named Paulson as one of those responsible for the crisis
• Hank: Five Years From the Brink (2013): Documentary directed by Joe Berlinger and distributed by Netflix
• Panic: The Untold Story of the Financial Crisis (2018): HBO documentary featuring Paulson

Awards and recognition

• Eagle Scout
• Distinguished Eagle Scout Award
• All-American (honorable mention), college football
• Phi Beta Kappa
• 2007: Golden Plate Award of the American Academy of Achievement
• 2009: Harvard Business School Alumni Achievement Award
• 2011: Committee of 100 Leadership Award for Advancing U.S.-China Relations
• 2015: Honorary doctorate, Washington College
• 2016: Environmental Law Institute Environmental Achievement Award

Bibliography

• <ref>On the Brink: Inside the Race to Stop the Collapse of the Global Financial System.Business Plus.ISBN 978-0-7553-6054-3.</ref>
• <ref>Dealing with China: An Insider Unmasks the New Economic Superpower.Twelve.ISBN 978-1-4555-0421-3.</ref>

See also

• Goldman Sachs
• 2007-2008 financial crisis
• Troubled Asset Relief Program
• Too Big to Fail (book)
• Ben Bernanke
• Timothy Geithner
• Lehman Brothers
• Paulson Institute

Further reading

• Sorkin, Andrew Ross. Too Big to Fail (2009)
• Stewart, James B. "Eight Days: The Battle to Save the American Financial System," The New Yorker, September 21, 2009
• Purdum, Todd S. "Henry Paulson's Longest Night," Vanity Fair, October 2009

External links

• The Paulson Institute
• The Nature Conservancy
• Appearances on C-SPAN