Treasury Secretary Paulson on Taxpayer Bailout

NEWSWEEK COVER: King Henry

Treasury Secretary Paulson on Taxpayer Bailout: 'It's Very Unpleasant for Me, But It's a Lot More Attractive Than the Alternative' The Former CEO of Goldman Sachs has Emerged as Investment Banker in Chief; Says There Will be Housing and Mortgage Issues for Years; 'The Key is to Get Stability'

Last update: 12:34 p.m. EDT Sept. 21, 2008

NEW YORK, Sept 21, 2008 /PRNewswire via COMTEX/ -- Henry Paulson -- free-market thinker, former CEO of Goldman Sachs and Treasury secretary to a conservative Republican president -- was unveiling to the world a massive taxpayer bailout of the American financial system, a message he never thought he'd have to deliver, reports Senior Editor Daniel Gross in the current issue of Newsweek. Afterward, as he headed into yet another weekend of nonstop work with his team, carrying the weight of the troubled markets on his shoulders, the former college-football star was clearly conflicted about what he'd just proposed. "It's very unpleasant for me, but it's a lot more attractive than the alternative," Paulson tells Newsweek. "We can spend a lot of time talking about how it happened and how we got here. But we have to get through the night first."

In the September 29 Newsweek cover, "King Henry" (on newsstands Monday, September 22), Gross profiles Paulson, who came to Washington from Wall Street in 2006 expecting to deal with issues like Social Security reform and trade agreements. At a time when President Bush seems to have largely checked out, Gross reports, the teetotaling 62-year-old has emerged as the nation's most powerful leader -- the investment banker in chief. As he did on the Street, Paulson continues to advise CEOs on the best course of action, to arrange financing and to get the best terms possible for his clients. Only now his clients are American taxpayers, the president and the global financial system.

While bailouts are regrettable and expensive, Paulson argues that one is needed to restore confidence in the system. "We're going to have housing issues and mortgage issues for years," he tells Gross. "The key is to get stability." But unlike other recent actions, this one will require greater cooperation from Congress. And there Paulson is likely to run into some roadblocks.

Paulson works at a pace to which Washington isn't quite accustomed. All month the staff dining room at Treasury has remained open on weekends, with a buffet of tuna-fish and peanut-butter sandwiches. Paulson doesn't use e-mail and prefers to get information by phone. Staffers refer to him as a "serial dialer." But he doesn't spend a lot of time making small talk. "He's a no- bulls--t kind of guy," says Barney Frank, chairman of the House Financial Services Committee. "He gets down to business and gets things done."

This brusqueness, and the desire to move on to the next problem, doesn't always go over well on Capitol Hill. The criticism of Paulson has come mostly from conservative Republicans in the House who are incensed over the bailouts. "I think for all intents and purposes, Congress has been left out of the loop and treated after the fact," says Rep. Scott Garrett, a New Jersey Republican. Having already acquiesced to the creation of hundreds of billions of dollars in potential taxpayer obligations, Congress isn't likely to just hand over hundreds of billions more without demanding some concessions like assistance for strapped homeowners.

The decisions made on the fly these past several months will have impacts that last deep into the next administration, long after the end of Paulson's tenure -- perhaps one of the most eventful of any Treasury secretary since Alexander Hamilton.

    (Read cover story at  www.Newsweek.com)  http://www.newsweek.com/id/160119