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Last Updated: Tuesday, 30 May 2006, 17:17 GMT 18:17 UK
A new PR man for the US economy
By Toby Poston
Business reporter, BBC News

Mr Paulson will be tasked with promoting US economic policy

As chairman and chief executive for the past seven years, Henry Paulson has presided over Goldman Sachs' rise to become the world's top investment bank.

The skills he learnt in the cut-throat world of high finance will be vital if he is appointed to a new role as US Treasury Secretary.

But it is doubtful whether he will make many executive decisions in his new job which, during the current Bush administration, has been more about selling economic policy than making it.

And he is certainly not moving for the money - he earned $30m at Goldman in 2004.

"It is difficult to know exactly why he is going for a job which will involve such a pay cut," says David Wyss, chief economist at credit rating agency Standard & Poors.

"It is probably a mixture of a desire for public service, believing in the government's economic policies and a bit of ego."

Presidential credit

Most economists agree that Henry "Hank" Paulson is a good candidate for the Treasury Secretary role that President Bush wants filling.

"His job will largely be about selling the US to the rest of the world's economic and financial community," says Brian Fabbri, chief economist at BNP Paribas in New York.

"He will represent the US in all the major high level meetings, on trade, finance and currency. He will also deal with budget matters like social security and tax."

With a 33% approval rating, the lowest for any president in 25 years, President Bush is fed up at not getting any credit for what he sees as a strong US economy and jobs market.

President George W Bush and his Treasury Secretary nominee Henry Paulson
The president wants Mr Paulson to boost his message on Wall Street

Among the many economic statistics cited while announcing his nomination of Mr Paulson were the facts that the US economy grew at an annual rate of 5.3% in the first quarter of 2006, and has added 5.2 million jobs since August 2003.

All the more annoying that voters are still giving poor marks to the administration for its economic management.

Mr Paulson's experience of international business and extensive contacts list could help rejuvenate the way the White House sells its economic story.

The Goldman Sachs veteran is also well-known and respected by bankers, financiers and currency traders around the world who are concerned about the expanding US trade deficit and the falling value of the dollar.

No clout

But most economists doubt whether President Bush would want an ambitious policymaker with a zeal to stamp his mark on the US economy.

Neither of his previous two Treasury Secretaries have had any real clout when it comes to making policy initiatives, which have mostly come from the White House.

Andrew Busch, an analyst at the banking group BMO Nesbitt Burns, thinks Mr Paulson "must have received assurances from the White House that he would have a place at the policy table".

"This could be a big positive," he says.

Mr Paulson is no stranger to the White House, having worked as a staff assistant in 1972, during President Nixon's administration.

File with Goldman Sachs written along spine
Goldman Sachs has outperformed its rivals in recent years

He is following a long tradition of senior Goldman Sachs partners who have gone on to pursue a second career in politics.

They include Joshua Bolten, the current White House Chief of Staff, Stephen Friedman, one of President Bush's chief economic policy advisors, and Robert Rubin, who was Treasury Secretary for much of President Bill Clinton's administration.

Goldman's golden era

If Mr Paulson gets approved by the Senate for the Treasury top job - which looks highly likely - he leaves Goldman Sachs in probably the strongest position in its history.

Its stock is just short of a record high, and in recent years Goldman has beaten off rivals Merrill Lynch and Morgan Stanley to become the world's pre-eminent investment bank.

It has developed an enviable client list of some of the world's most successful companies, and has made some well-timed investments of its own - last year it bought, then sold on, a 12% stake in carmaker Mitsubishi Motors within the space of three days.

The bank also has a growing involvement in China and is one of three underwriters on the Bank of China's $10bn public share offering, which should see trading begin this week.

"Goldman Sachs is an organisation of partners, some of them prima donnas, and he (Mr Paulson) has done a good job of leading them," says Standard and Poor's David Wyss. "This should help him when dealing with the Senate."


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