http://www.vanityfair.com/politics/features/2009/10/henry-paulson200910?printable=trueHenry Paulson’s Longest NightIn 2006, Goldman Sachs C.E.O. Henry Paulson reluctantly became Treasury secretary for an unpopular, lame-duck president. History will score his decisions, but the former Dartmouth offensive lineman definitely left everything on the field. In private conversations throughout his term, as crisis followed crisis—Bear Stearns, Fannie Mae and Freddie Mac, Lehman Brothers, A.I.G., and so forth—Paulson gave the author the inside track, from the political lunacy and bailout plans to the sleepless nights and flat-out fear, as he battled the greatest economic disruption in 80 years.
By Todd S. Purdum
October 2009
It was February 2008, and Henry M. Paulson Jr., a prince of Wall Street turned secretary of the Treasury, was reflecting on his biggest achievement to date: a $168 billion economic-stimulus package that had passed Congress four days earlier after swift, bipartisan prog ress through both houses. In light of all the later twists and turns that the global financial system and the national economy took, this measure would come to seem quaint and fainthearted. But at the time, it was a very big deal indeed, and Paulson felt justifiably proud. The stimulus had been his baby. Paulson had persuaded George W. Bush, whose relations with both parties in Congress were by then close to toxic, to articulate only the broadest principles, and not to present a detailed plan. Paulson himself, in endless night and weekend negotiations with congressional leaders, had delivered the final package.
“Nancy Pelosi to me was a wonder in this deal, and she was available 24-7, anytime I called her on the cell phone,” Paulson told me, his hulking frame unfolding in a comfortable chair in his office at the Treasury, dominated by an oil portrait of his first pred e ces sor, Alexander Hamilton. “She was engaged, she was decisive, and she was really willing to just get involved with all of her people on a hands-on basis.” Paulson paused. “Now let me … I’ll be there in one minute … Let me just make a … I have been, you know … I finished this thing on Thursday night, flew over to Tokyo, flew back, and I’m battling a bit of a stomach problem.”
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As I look back over our conversations, one man whose name comes up frequently and stands out as an exception to everything that left Paulson cold about Washington’s way of doing business is Barney Frank, the Democratic congressman from Massachusetts and chairman of the House Financial Services Committee, who was a key player in almost all the actions Paulson took as the crisis unfolded. “This is a guy that’s got the intellect, he’s got the energy, he cares, and he wants to legislate, knows how to legislate,” Paulson said. “He’s interested in getting across the finish line. Now, I just wish he were a Republican and we all shared the same policy principles, and you’d cut a wide swath!”...
A surreal atmosphere had descended on Washington. The Republican presidential nominee, John McCain, “suspended” his campaign and joined a contentious emergency meeting at the White House, along with Barack Obama. The process degenerated into partisan bickering and stalemate. There was such outrage among the public at the idea of a bailout for Wall Street—with calls running 60 to 1 against—that on September 29 the House Republicans succeeded in initially defeating the bill.
Paulson and administration officials were shocked, though Barney Frank read the situation correctly, as Paulson recalled: “He said, ‘Well, sometimes, you know, kids have got to run away from home and be hungry before they come back.’ ” Four days later, the runaways came home, and a barely revised version of the program passed. “It was one of the most difficult things I’ve ever done, to go up there, to go through these hearings, which are all about … it’s entertainment, and it’s speaking to the people back home, and it’s sound bites. And to be doing that at the same time you’re trying to negotiate something this important was exhausting.”
By early October, when we talked about the episode, Paulson had just returned from a short weekend on the Georgia shore, catching redfish and banding a peregrine falcon. It was a rare reminder of Paulson as an outdoorsman, and of the fact that what had given some Republicans pause about Paulson when he was nominated was that he was a potential conservationist, not a potential interventionist. Paulson reflected on what he had just been through:
“Republicans, in particular in the House, were very vulnerable, and so it was against their philosophy, against everything they’ve been saying about markets.” But there was another reason the Republicans were unhappy: “Because the Democrats would rub their noses in it and say, You know, we’re working closely with Paulson. And so every time Barney Frank would say, ‘I’m working closely with Paulson,’ that was like waving a red flag in front of a bull.” Around this time, Newsweek ran a cover story on Paulson with the headline king henry. It was not helpful. “After that article, I had a number of people I was dealing with, and they all say, ‘You’re not king, O.K.?’ In private, on the phone, ‘You’re not king.’ And I’m saying to myself, Thank you, Newsweek, you know? You really
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