Wall Street Bailout Heavy On Paulson's Shoulders

Treasury Secretary Henry Paulson is more than just the man of the moment. He's likely the man who'll get the credit or the blame — depending on what happens with the economy. Paulson is the chief architect of the government's $700 billion bailout plan. One friend says Paulson is actually better under pressure.

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STEVE INSKEEP, host:

It's Morning Edition from NPR News. Good morning I'm Steve Inskeep, Renee Montagne's away. No matter how hard we try to understand the financial bailout we are being asked on some level to trust the experts. We're being asked to trust that it's really necessary to buy $700 billion worth of bad debt and trust that we might get some of our money back. This morning we are going to profile the most important expert of all. Treasury Secretary Henry Merritt Paulson, Jr. is the man who will get the credit or the blame depending on how his plan works. NPR's Yuki Noguchi has this profile.

YUKI NOGUCHI: Jeffrey Garten befriended Paulson in college. They worked in adjacent offices for the Nixon administration. And later, rose to the ranks together as Wall Street executives.

Professor JEFFREY GARTEN (Practice of International Trade, Finance and Business, Yale School of Management): He's one of the most intense people I have ever met. And I say this - I have met a lot of intense people.

NOGUCHI: Garten, a professor at Yale, is no slouch. But he says, Paulson keeps him on his toes.

Prof. GARTEN: He's so alert that it makes you feel totally lazy if you're not - you know, if you're not prepared to perform at the highest level no matter what you're doing.

NOGUCHI: James Gorder(ph) shares his view. Gorder headed the Chicago office of Goldman and hired, then mentored Paulson 34 years ago. He says Paulson, now 61 years old, appears to have lost none of the endurance and vigor that made him stand out within an office full of overachievers.

Mr. JAMES GORDER (Former Head, Chicago office of Goldman Sachs): Put yourself in his position. I mean, this has been a long time. There's been no - talk about vacations. I mean, there's not even been a day off.

NOGUCHI: Would you ever want to trade places within him?

Mr. GORDER: No, I wouldn't. I think to myself. My god could I do that and I could not? No.

NOGUCHI: Paulson has friends and he also has critics when he and now New Jersey governor, John Corzine, shared the CEO title at Goldman. They disagreed over how to handle taking the firm public. Corzine left in 1999, on the same day of the bank's public offering. A few years later, former New York Stock Exchange chair, Richard Grasso, accused Paulson of double crossing. Grasso said Paulson, who was on the Board of the Exchange, initially approved of Grasso's huge pay package only to later call for Grasso's ouster when it attracted public criticism. Corzine's spokesman declined comment and Grasso did not return calls. And then, there's James Elman(ph). He's a portfolio manager at the C-Cliff(ph) Capital Hedge Fund, which invests mainly in financial services. Elman says in its original form, the Paulson plan, as it's come to be known, fell far short of the hard bargain Paulson drove in the earlier bailout of insurance giant, AIG.

Mr. JAMES ELMAN (Portfolio Manager, C-Cliff(ph) Capital Hedge Fund): It is a terrible plan. It's basically a massive transfer of wealth from taxpayers to bondholders and financial services companies.

NOGUCHI: Under pressure from Congress, Paulson and the administration have since agreed to amend the original plan. The compromise worked out over the weekend includes limits on executive pay and gives taxpayers stakes in participating companies who want to sell their bad mortgage debts to the government. In the past, Paulson had sought to crack down on financial misdeeds. After Enron and WorldCom collapsed following accounting scandals, Paulson spoke at the National Press Club. Then the still head of Goldman Sachs, he said banks had played an important role and called for stricter regulatory controls on his industry.

Mr. HENRY PAULSON (Secretary, U.S. Treasury Department): In my lifetime, American business has never been under such scrutiny and to be blunt much of it is deserved.

NOGUCHI: Long-time friend, Jeffrey Garten, says Paulson's actually better under fire.

Mr. GARTEN: The hotter the fire, the cooler he gets.

NOGUCHI: Garten recalls playing him in a game of paddle tennis. Paulson was new to the sport, and Garten ran him all over the court.

Mr. GARTEN: I thought he was going to die. I really thought he was having a heart attack.

NOGUCHI: With Paulson doubled over, Garten tried to call the game off. But after a minute, Paulson insisted they play on.

Mr. GARTEN: And he came on like a raging bull. And I tell you, I couldn't - I simply couldn't win a point.

NOGUCHI: So he won the game.

Mr. GARTEN: Oh, yeah. He won the game. I mean, in a way, it's - I never thought - it's kind of a metaphor for this financial thing because he was - he's been trying a bunch of things in the best of fate and they haven't worked. And all - you know, and it just like he took a breath and he said we're not going to let this thing go. We're going to turn it around.

NOGUCHI: And so with the economy on the line, for Henry Paulson, the game is very much on. Yuki Noguchi, NPR News.

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