Hey McCain And Obama: Who's Your Paulson?

Here's a quick question: Who were President George W. Bush's first two secretaries of the Treasury?

If no names come to mind or if you're surprised to hear there were two before Henry Paulson you are in good company. Until Paulson left Goldman Sachs in June 2006 to become Bush's third try at Treasury, the position commanded far less notice than it does today. The big newsmakers in the first seven years of the Bush Cabinet were of course the secretaries of State and Defense and the attorneys general.

All that changed when the mortgage and credit crisis deepened over the past year and Paulson emerged as the man of the hour. His power seems to have grown with every month and every downturn in the market. When a deteriorating situation became a full-scale meltdown, Paulson and his staff brought forth the massive $700 billion plan Congress is now expected to adopt (with alterations of its own) this week.

So for the Bush regime and its economic program at this crucial moment, the point man, the triggerman and the main man is Hank. The president has deferred to him in the present moment, and the power he would wield under the terms of the new bailout agreement would be unprecedented in American economics. Newsweek put him on its cover with just two words: KING HENRY.

An exaggeration? Not in the financial world. It is stunning to realize how much authority Paulson has had to choose winners and losers in recent weeks and months, and truly breathtaking to contemplate the potential for that power's expansion.

Sure, there is to be a bipartisan oversight board. But we've seen this movie. And that's why the centralizing of authority remains a salient point of attack for critics on the right and the left (Mr. Gingrich, meet Mr. Nader). Yet the plenipotentiary Treasury secretary remains a key feature of the plan.

So if the Treasury secretary is to be the new czar, who will be the new Treasury secretary? Paulson serves a president who will leave office in less than four months. Unless the new president asks him to stay as Warren Buffet and others have urged Paulson will soon transfer his extraordinary new powers to a new pair of hands.

Whose hands will those be? Just one man will decide, and that man will be either John McCain or Barack Obama. So it would have made sense, in the first presidential debate, for moderator Jim Lehrer of PBS to ask these two men to reveal whom they had in mind for Treasury secretary. Why not tell the world just which wizard of Wall Street we can expect to see running the financial industry next?

Back when McCain and Obama were choosing their running mates, the broad public perked up and the media got a case of the vapors. Shouldn't the new czar of all sectors public and private be at least as important?

At the moment, everyone is guessing. We see the men and women the candidates have recruited as advisers, to be sure. We know that until he embarrassed his candidate, former Sen. Phil Gramm (now working for the Swiss investment bank UBS) was co-chairman of McCain's campaign. After he called the U.S. "a nation of whiners" suffering from "a mental recession," Gramm made himself scarce. But if McCain were to become president, Gramm might come out of hiding in a hurry.

Few may recall, but Gramm himself ran for president for a time in 1996, and his campaign chairman was none other than John McCain, who in the past has referred to Gramm as his "economic brain."

Other prospects include some of McCain's former rivals in the presidential hunt, such as former governor and venture capitalist Mitt Romney, and prominent backers from the executive boardroom, such as Carly Fiorina (late of Hewlett-Packard) or Meg Whitman (eBay).

Obama has not been seen as often in the company of blue chip business folk, with a few notable exceptions such as former Fed Chairman Paul Volcker and Robert Rubin (the best of Bill Clinton's three Treasury secretaries and a Paulson predecessor as Goldman Sachs CEO). Neither is considered a likely pick for the rigorous new task at Treasury, although there has been talk of a return engagement for his immediate successor, Lawrence Summers, who had several stormy years as the president of Harvard University in the interim.

Another prospect often mentioned is Timothy Geithner, president of the New York Fed, who has been known to advise Obama. Steven Rattner, a onetime reporter for The New York Times who became an investment banker in the 1980s, is also regarded as a prospect.

Whoever gets the nod will need to balance the demands of the financial and political communities while also navigating the world of the media. It's quite a job description. Let's hope it gets some airtime in the "town hall" debate slated for Oct. 7.

And by the way, the first two Bush secretaries of the Treasury were Paul H. O'Neill and John W. Snow.

O'Neill left after two years very much at odds with his boss. Not only did he resist the tax-cutting at the heart of the Bush economic program, he sponsored a study that estimated the country would need a 66 percent increase in income taxes to meet all its obligations at home and abroad in coming decades. If that were not bad enough, O'Neill published a book (The Price of Loyalty) accusing the Bush administration of using the Sept. 11 terrorist attacks to justify a pre-existing plan to invade Iraq.

Snow was not nearly so outspoken, and his 42 months on the job saw economic conditions improve dramatically. But Snow was not able to able to transfer the luster of the improved economy to his boss, who needed it badly. After ignoring broad hints from the White House for more than a year, he gave way to Paulson in June 2006.

Since then, Paulson has given the job unprecedented importance and visibility. His successor will have to live with both.

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