Paulson Pick Goes From Bad to Worse

A few things to add to my earlier report on the nomination of Henry M. Paulson Jr. to replace John Snow as Treasury secretary. Let me preface this post by noting that what you read here is depressing. At a time when the Bush Administration desperately needs to salvage its standing with conservatives, it has had another Harriet Miers moment.

1. The Center for Responsive Politics has released its own evaluation of Paulson’s giving. And with all of its tools at its disposal, Massie Ritsch and Neil Tambe have done a good job painting a picture of Hank Paulson and his wife’s giving. As I noted earlier and they confirm, Paulson is a big-time donor to Republicans, but a look at the giving of Paulson’s wife reveals some interesting nuggets of information:

Wendy Paulson has given $6,000 to New York Sen. Hillary Clinton’s campaigns and $5,000 to her political action committee, HILLPAC. Together, the Paulsons have given $10,000 to the Democratic Party of Idaho. For her $5,000 gift to the state party, Wendy Paulson listed her occupation as “conservationist.” She has served on the board of the Nature Conservancy, and her husband has most recently served as board chairman.

In addition to the couple's contributions to candidates and parties, Wendy Paulson has been a major contributor to the League of Conservation Voters' 527 fund, which campaigned for Democrat John Kerry and against George W. Bush in the 2004 presidential election. She has given at least $401,000 to the League's political activities since 2000.

2. The Competitive Enterprise Institute has weighed in on the Paulson nomination, and it’s more bad news for the Bush Administration.

The White House made an unfortunate mistake in nominating Henry M. Paulson, Jr. to be the next Secretary of the Treasury, according to the Competitive Enterprise Institute. The Goldman Sachs chairman's other role as chairman of the board of the Nature Conservancy, which is under investigation for financial misdealings that benefited some of its officers and donors, should automatically disqualify him for the top Treasury job.

“No conservative administration should consider appointing anyone who works for the Nature Conservancy to any position and certainly not to one carrying the high responsibilities of Treasury Secretary. The financial scandals at the Nature Conservancy uncovered by the Washington Post are only the tip of the iceberg. The Nature Conservancy has served as the agent for turning millions of acres of productive private land into federally-owned land and has made huge profits doing so,” said CEI’s Director of Energy & Global Warming Myron Ebell. “The question that needs to be asked is, what will Mr. Paulson be able to do as Treasury Secretary to benefit the Nature Conservancy and its big corporate partners?”

“The Nature Conservancy is one of the most feared environmental groups throughout rural America,” said R.J. Smith, CEI Adjunct Scholar. “While promoting itself as a ‘private’ conservation group, small landowners, family farmers, ranchers and tree farmers know it as a strong-arm real estate agent for the federal government. It acquires land at fire-sale prices from landowners bankrupted by environmental regulations, then turns around and sells most of it to the federal government at inflated prices. The last thing America needs is more range and forest land for the federal government to mismanage and burn down.”

A far better choice for Treasury Secretary would be a candidate in the mold of outgoing Secretary John Snow. During his tenure, Secretary Snow has quietly pursued a strong agenda of pro-growth policies that have left the U.S. economy with low inflation, steady growth, and near record-low unemployment.

“We hope that President Bush will come to see the mistake he’s made and withdraw Mr. Paulson from consideration,” said Ebell. “The country doesn't need another Paul O'Neill, who will neglect his job in order to promote the Kyoto global warming treaty and other radical environmental causes.”

3. Earlier today the National Legal and Policy Center’s Peter Flaherty came out against the nomination of Paulson.

NLPC was the sponsor of a shareholder proposal at the Goldman Sachs annual meeting on March 31. The proposal, which generated significant media attention, asked for a report on Paulson's apparent conflict of interest in chairing both Goldman and the Nature Conservancy.

In November 2005, Goldman Sachs adopted an "Environmental Policy" that closely parallels the Nature Conservancy agenda on key issues like global warming. Moreover, Paulson's son Merritt is a trustee of a Nature Conservancy-related group that was the recipient of a Goldman Sachs donation in the form of a tract of land totaling 680,000 acres in Chile.

In his remarks at the annual meeting, Flaherty also noted that the Nature Conservancy has been mired in scandal in recent years, as detailed in a Washington Post series and in Senate hearings. The group sold ecologically sensitive land at a discount to its own trustees on which they built multi-million-dollar vacation homes, and structured land donations so wealthy donors could improperly receive tax breaks.

Goldman's defense, delivered at the meeting by John H. Bryan, chairman of the Goldman Governance Committee, was essentially that the Goldman board reviewed the environmental policy and the Chilean land deal and approved them. Bryan specifically denied that the Nature Conservancy was involved at all in the land deal. According to the Nature Conservancy tax return, however, it was paid a consulting fee of $144,000 by Goldman for assistance on the land deal.

In an April 4 opinion article in the Wall Street Journal titled "Green-Nosing," business writer Judith Dobrzynski wrote, "It's ludicrous to suggest that Goldman's board acted alone, as if directors didn't know of Mr. Paulson's involvement with the conservancy or his advocacy of environmental causes."

Flaherty said, "There remain unanswered questions about Paulson's personal and business ethics. At Goldman Sachs, Paulson promoted his own personal interests at the expense of shareholders. As Treasury Secretary, will he promote the public interest, or his own?"

Flaherty also cited Goldman Sachs' role in the Fannie Mae scandal. According to last week's report by the Office of Federal Housing Enterprise Oversight (OFHEO), Fannie Mae managers engaged in a series of questionable transactions, including two with Goldman Sachs, which improperly pushed $107 million of Fannie Mae earnings into future years. The goal was to rig the company's books to make it appear that the company had reached earnings targets triggering the maximum possible payout for executives including Franklin Raines.