The business press is likely to greet Bush's selection of Hank Paulson as Treasury secretary with polite applause, especially since Paulson stood up in the middle of the "crisis of investor confidence" in Wall Street in his June 5, 2002 speech at the National Press Club.
Paulson was applauded for not pulling punches, even when it came to his own industry, and "the way it conducts investment research." It seemed like a bold statement until he hired Andrew Melnick to head Goldman's research department, despite the fact that Melnick had been responsible for supervising Henry Blodget at Merrill Lynch.
Moreover, though the "inside reformer" called for aggressive changes in corporate governance, he managed to avoid naming names, lest he upset any clients. Like Arthur Levitt, Paulson is good at hedging.
Paulson was so concerned for the integrity of Wall Street, he agreed to meet Harvey Pitt to discuss possible reforms. But Pitt, ever the skilled civil servant, forgot to notify the SEC's enforcement staff, which was conducting an ongoing investigation.
As a member of the NYSE's board Paulson is credited with winning the battle to oust Dick Grasso at the NYSE after the latter took a $139 million pay package. Paulson himself earned a $600,000 salary and a cash bonus of $11 million in 2001. Perhaps he can't be faulted for taking huge bonuses while cutting staff. Everyone was doing it.
But if Paulson is to be applauded for pushing reform from the inside, it'll be interesting to see how long he can last in one of the most secretive and mendacious administrations in history.
Recall that one of his first jobs was as an aide to John Ehrlichman in President Richard Nixon's White House. Once he began to believe that the President was lying, Paulson quit. A White House colleague later recalled that at the time, "He was very troubled."
What should be troubling is how much blind ambition can push a man to overlook obvious problems going into a situation like this. Perhaps Bush's plutocratic tax breaks and enormous deficits don't bother Paulson, but for a guy who railed against bad corporate accounting, all this Enronomics in government should be obvious.
You'd think he'd be putting a call into his predecessor Paul O'Neill to find out the best way to communicate with "a blind man in a room full of deaf people."