Before he became the US treasury secretary in 2006, Henry M. Paulson Jr agreed to hold himself to a higher ethical standard than his predecessors. He sold all his holdings in Goldman Sachs, the investment bank he had run, and said he would avoid any substantive interaction with Goldman executives unless he first obtained an ethics waiver from the government.
But today, seven months after Paulson left office, questions are being asked about his part in decisions last fall to prop up the teetering financial system with taxpayer dollars, including aid that benefited his former firm.
Last month in Washington, answering questions from members of Congress about his relationship with Goldman, Paulson testified: “I operated very consistently within the ethic guidelines I had as secretary of the treasury.”
He added that he had asked for a waiver involving his interactions with the bank “when it became clear that we had some very significant issues with Goldman Sachs”. Copies of two waivers he received—from the White House counsel and the treasury department—show they were issued on 17 September.
That was a day after the government agreed to lend $85 billion (Rs4.07 trillion) to the American International Group Inc. (AIG), which used the money to pay off Goldman and other banks financially threatened by AIG’s potential collapse.
While Paulson spoke to many Wall Street executives during that period, he was in very frequent contact with Lloyd C. Blankfein, Goldman’s chief executive, according to a copy of Paulson’s calendars acquired by The New York Times through a Freedom of Information Act request. During the week of the AIG bailout alone, they spoke two dozen times, far more frequently than Paulson did with other Wall Street executives.
Michele Davis, a spokeswoman for Paulson, said Federal Reserve officials, not Paulson, had played the lead role in shaping and financing the AIG bailout.
But Paulson was closely involved in decisions to rescue AIG, according to two senior government officials who requested anonymity.
Ethics specialists said the circumstances of Paulson's waivers were troubling.
©2009/THE NEW YORK TIMES