Goldman Sachs chief Henry Paulson was tapped Tuesday to be the next Treasury secretary by President Bush, who turned to a 32-year Wall Street veteran to help breathe new life into his economic agenda and revive his troubled presidency.
It marked the latest in a string of major changes in the president's personnel lineup that started two months ago with the replacement of Bush's chief of staff and has grown to include his CIA director, budget chief and top trade representative.
Paulson, 60, was named to succeed John Snow, the former head of railroad giant CSX Corp., who took the Treasury helm in February 2003. Snow, who tendered his resignation Tuesday after a long period of speculation about his job security in the Cabinet, plans to stay on for a bit to ensure a smooth transition.
With a three-decade Wall Street career under his Belt, Paulson has served as the sole chairman and chief executive officer of Goldman Sachs, a global financial powerhouse, since May 1999.
"He has a lifetime of business experience. He has intimate knowledge of financial markets and an ability to explain economic issues in clear terms," Bush said of Paulson, whose nomination is subject to Senate approval.
The White House hopes those credentials will help Paulson -- who will be the third Treasury secretary since Bush took office in 2001 -- to make a more forceful case for the president's economic policies at home and abroad.
There is little expectation of major economic initiatives the rest of this election year -- or even during the remainder of the president's tenure.
It also remains to be seen the extent to which Bush will entrust Paulson with forging economic policy. The Treasury Department under Snow -- and his predecessor, the sharp-tongued Paul O'Neill -- played a very limited role in the policymaking process, which was tightly controlled by the White House.
On Wall Street, Paulson's nomination failed to ease investor anxiety over climbing oil prices and sagging consumer confidence. The Dow Jones industrials tumbled 184.18 points.
A millionaire many times over, Paulson was paid $30 million in total compensation in 2004 from Goldman Sachs -- almost a 40 percent gain from the year before.
Paulson is a major Republican donor and fundraiser.
He collected at least $100,000 for Bush's 2004 campaign, earning the label "pioneer" reserved for Bush's six-figure fundraisers. Paulson has donated at least $68,000 to GOP campaigns and party committees so far in the 2005-06 election cycle, including $25,000 to the National Republican Senatorial Committee and $15,000 to its House counterpart, figures compiled by the Political Money Line campaign finance tracking service show.
Bernanke, who has had a bit of a bumpy start in terms of communicating with financial markets, described Paulson as "highly respected throughout the financial world." Given the new Fed chief, economists said it couldn't hurt to have Paulson's seasoned market experience on the Bush team.
Paulson is to take over the Treasury post at a time when the economy -- which had posted its strongest growth spurt in 2 1/2 years in the opening quarter of 2006 -- is expected to log slower growth.
Rising energy prices are a wild card for the economy, while big budget and trade deficits also pose risks.
Trying to defuse trade tensions with China is another challenge. The United States racked up a record-high $202 billion trade deficit with the Chinese last year.
As Treasury secretary, Paulson will not only become the president's top economic salesman but also the top spokesman for the U.S. dollar.
Snow's financial diplomacy led China to take important steps in revamping a currency policy that some in the U.S. had blamed for the huge trade deficit and a loss of manufacturing jobs. With his worldwide contacts, Paulson might be able to bring about further change to relieve the trade situation, some economists and policymakers said.
Clad in a crisp dark suit, Paulson accepted the nomination Tuesday as the president and Snow looked on.
"Our economy's strength is rooted in the entrepreneurial spirit and the competitive zeal of the American people and in our free and open market," Paulson said. "It is truly a marvel, but we cannot take it for granted. We must take steps to maintain our competitive edge in the world."
Paulson's nomination was met with applause from many in the financial community. They also commended Snow for his leadership during the last three years.
Sen. Max Baucus of Montana, the panel's highest-ranking Democrat, called Paulson an outstanding choice and said the administration could benefit by "taking Hank's expert advice and restoring Treasury's central role as the economic policy driver in the executive branch."
Another Democrat, Chuck Schumer of New York, said Paulson was "the best pick America could have hoped for."
The nomination process, however, is likely to throw a fresh light on the chasm between Democrats and Republicans over the president's economic policies.
Republicans credit the president's tax cuts for helping cushion the blow of the 2001 recession. Democrats say the tax cuts mainly helped the wealthy and plunged the government's balance sheets deeper into red ink.
"Mr. Paulson will face many challenges ... in steering our economy toward greater prosperity for all Americans," said Senate Democratic leader Harry Reid of Nevada.
Speculation that Paulson would take over from Snow increased after Joshua Bolten, a former Goldman Sachs executive who had worked with Paulson and was leading the effort to find a replacement, became the new White House chief of staff.
Snow, meanwhile, plans to attend the June 9-10 meeting in Russia of finance ministers from the Group of Eight major industrial countries. That meeting will help prepare the agenda for this year's G-8 summit which is being held in July in St. Petersburg.
A loyal lieutenant in Bush's economic team, Snow has traveled around the country promoting, among other things, Social Security changes and an overhaul of the tax code. His standing, however, suffered as both proposals stalled.
Handing off the baton, Snow said of Paulson: "He's an old friend, somebody I've admired and respected and worked with over the years. ... Hank will be a great addition to your administration."
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