September 21, 2008


Washington Post - When newly appointed White House chief of staff Joshua B. Bolten tried to shake up the Bush administration in the spring of 2006, he spent weeks wooing Goldman Sachs chief executive Henry M. Paulson Jr. to be Treasury secretary. Bolten had personal reasons for thinking Paulson might be a good pick -- Bolten himself had worked for the influential investment bank in Europe in the 1990s -- and Paulson eventually gave in to his persistent lobbying. . .

Paulson and Bolten are just two of the onetime Goldman figures who find themselves managing perhaps the biggest financial crisis since the Great Depression. After Paulson took over at Treasury in May 2006, he turned to Goldman colleague Robert K. Steel to help him oversee financial markets. Steel left recently to run Wachovia, but several other Goldman alumni remain to help Paulson deal with the ongoing market turmoil.

Such heavy reliance on the most prestigious Wall Street investment firm has become something of a bipartisan Washington tradition in recent years; Clinton Treasury Secretary Robert E. Rubin was also a co- chairman of Goldman Sachs, as was Bush economic adviser Stephen Friedman. But if the Wall Street meltdown continues, the tradition may come under scrutiny, especially if Goldman eventually needs the kind of government assistance granted Bear Stearns or American International Group.

From the right, prominent voices question Paulson's use of taxpayer dollars to help rescue private firms, while liberal and labor groups attack the ideological orientation of the Treasury secretary and other officials hailing from Goldman.

"Goldman culture has prided itself on creating sort of financial statesmen who would come to Washington as well as operate in the highest realm of finance," said Robert Borosage, president of the Institute for America's Future, a liberal think tank. "What's clear is that these people in both parties -- whether it's Rubin or Paulson -- have been leading promulgators of the deregulation that has gotten us in this hole."


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