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“Bush Picks Wall St Heavyweight to Win Over Public on Economy”
President George W. Bush has long been under pressure to pick a strong Treasury secretary in the mould of Robert Rubin, the former Goldman Sachs co-chairman who did the job under President Bill Clinton.
In choosing Hank Paulson over a handful of safer choices, Mr Bush has gambled that another Treasury chief with lustrous Wall Street credentials may finally help him gain the political credit for the strong US economy that his Republican party badly needs.
The latest polls show that two-thirds of Americans dislike Mr Bush's handling of the economy despite 5.3 per cent growth in the first quarter of this year. Mr Paulson will give the administration a powerful economic leader and spokesman to try to persuade them to change their minds.
Republicans exhausted even the usual superlatives yesterday in responding to the pick. John Boehner, the House leader, called him "unrivalled in terms of experience and knowledge of the American economy".
But the choice is also a risky one. Unlike safer picks such as former commerce secretary Don Evans or Robert Zoellick, deputy secretary of state, Mr Paulson comes with a history of independence that may sit uneasily with a White House that has been determined to maintain tight control over all facets of economic policy.
"The most important thing is the overall policy direction of an administration, and the question with this administration has been more one of policy than personnel," says Gene Sperling, the former director of the White House National Economic Council under President Clinton.
Mr Paulson had been at the top of a long list of potential White House choices for the post since John Snow, the current Treasury secretary, told the president this year he was ready to leave.
Mr Snow was a loyal soldier for Mr Bush. He championed two major initiatives, Social Security and tax reform, which both died with the president's waning second-term influence on Capitol Hill. He repeatedly argued for cutting the budget deficit even as the White House added spending for defence and homeland security. Only on international economic policy, and particularly his deft handling of delicate negotiations with China over economic imbalances, was Mr Snow able to take charge on a critical policy issue.
Mr Paulson is likely to demand more. Chuck Schumer, the New York Democratic senator, spoke with Mr Paulson yesterday morning and said "the plan is to give him a broader role than recent Treasury secretaries", though he said Mr Paulson offered no specifics.
Dick Armey, a former Republican House leader once touted as a possible Treasury secretary, said: "Unless you're making a serious policy contribution, it would have made no sense for a man with his position, stature and compensation to take the job."
Mr Paulson's demand for a larger role parallels Tony Snow, who agreed to leave Fox News to become White House press spokesman, only after seeking private assurances that he would play a role in crafting policy as well as presenting it. Yesterday, for example, Mr Snow attended the meeting between Mr Bush and a panel of Iraq experts rather than lead the morning press briefing.
A first test of that expanded role may be in Mr Paulson's choice of deputy. The current deputy, Robert Kimmitt, is not a close ally of John Snow, and Mr Paulson is likely to want a more trusted number two.
Insiders say a likely choice would be John Rogers,vice-president at Goldman and Mr Paulson's keygatekeeper at the bank. Mr Rogers is a Washington veteran, who previously served under both Ronald Reagan and George H.W. Bush.
A second test may be whether he is allowed by Mr Bush to range outside the Treasury portfolio. In an interview with Der Spiegel in November, he downplayed the importance of the budget and current account deficits but said he was concerned about rising energy prices.
In the traditional Treasury portfolio, the budget deficit remains the biggest test. If he wants a Rubinesque legacy, Mr Paulson will need to play a leading role in bringing down a deficit that is projected to remain over $300bn (â‚¬230bn, £160bn) this year despite surging tax revenues.
Douglas Holtz-Eakin, former director of the Congressional Budget Office, says Mr Paulson is "a blue-chip hire for this administration" who may prove extremely influential in the current budget debates. But the only real power over congressional spending rests with Mr Bush, who has now gone longer than any president since Thomas Jefferson without vetoing a single bill.
On other issues, he will have more leeway. China will be a critical focus, and Mr Paulson knows the country intimately, having travelled there more than 70 times. He will also play a key role as Congress continues to negotiate the details of legislation that would revamp the way the US vets foreign takeovers of US assets on national security grounds.
The banking industry, including Mr Paulson, has warned members of Congress against passing legislation that would make the review process too onerous, warning that legislators could chill foreign investment in the US if the changes were too drastic. He will have direct responsibility over two big transactions being vetted - Alcatel's merger with Lucent and Toshiba's takeover of Westinghouse.