Hank's Likely Headaches
It's hard not to feel some sympathy for departing Treasury Secretary John Snow. He worked tirelessly for President Bush, trudging all over the country to plug the administration's policies. In 2005 Snow spoke at the Detroit Economic Club, the Omaha Chamber of Commerce and the Sony Technology Center in Mount Pleasant, Pa. For all his trouble, Snow earned only perfunctory public gratitude from the president and was subjected to repeated rumors that the White House was unhappy with his performance. Worse, he seemed to have had little effect on policy or the economy.</br></br>The same fate may befall Snow's anointed successor, Henry "Hank" Paulson, head of the highly profitable investment banking firm Goldman Sachs. Of course, it's not supposed to be this way. Paulson comes advertised as a Wall Street take-charge guy who will improve public economic confidence and reassert control over policy.</br></br>But how is that to happen? Unless he blunders badly, Paulson's role as chief economic spokesman doesn't matter much. Most Americans don't know the name of the Treasury secretary and don't care. What they care about is $3-a-gallon gasoline and 6.5 percent mortgage rates.</br></br>It's possible that Paulson will have more influence on policy than Snow had. As economist Roger Kubarych of HVB America points out, there's no shortage of challenges: trying to avert big bankruptcies (GM) in the auto industry; preventing disorderly shifts in global currency rates; curbing federal spending on retirement benefits; fixing the Pension Benefit Guaranty Corp., which insures defined-benefit pensions. The trouble is that Bush's positions on most issues are already set. Even if they weren't, many powerful interests -- Congress, the United Auto Workers, China, AARP -- may limit what Paulson can actually accomplish.</br></br>To excel as Treasury secretary, Paulson needs something no one wants: an economic crisis that enables him to act as hero, much as then-Treasury Secretary Robert Rubin (also once head of Goldman Sachs) and then-Federal Reserve Chairman Alan Greenspan did during the 1997-98 Asian financial crisis. Any new upset would spotlight Paulson (assuming the Senate confirms him) along with the new Fed chairman, Ben Bernanke. What are the odds of a crisis? Not great -- but not negligible, either. After three years of strong performance (5.3 million new jobs, 4.6 percent unemployment), the U.S. economy could be at a tipping point. Two problems loom: one traditional, one not.