Hank Paulson Was Thrown Softballs

The Senate Finance Committee, chaired by Chuck Grassley (R.-Iowa), failed the public this week by hurrying through the confirmation hearing of former Goldman Sachs CEO Henry M. Paulson as Treasury secretary.

For unknown reasons, the timing of the hearing was a closely guarded secret. The afternoon before the hearing, committee staffers insisted—in response to numerous phone inquiries— that no Paulson hearing date had been set. Then, suddenly, around 4:30 p.m. the committee’s website replaced the name of a nominee who had been listed for weeks with Paulson’s name. While the public and media were being misinformed, staffers were busily orchestrating the hearing slated for 10:00 a.m. the next morning.

Grassley in his opening statement tried to justify the sudden switch by citing a Bush Administration request for an accelerated confirmation. Attended by few members of the media, the public—or even the committee itself—the hearing was a well-choreographed exercise. Grassley refused to allow any witnesses other than Paulson.

The committee’s questions were mostly softballs involving tax cuts, the deficit and debt, and tracking terrorists through financial transactions. Paulson’s often stammering responses were generally vague or evasive. Only Sen. Jim Bunning (R.-Ky.) asked aggressive and probing questions (regarding the People’s Republic of China), but he could elicit only unsatisfactory responses from Paulson.

As a result, Paulson’s confirmation hearing ought to be remembered for the committee’s failure to probe significant ethical issues.

There’s the ongoing controversy over the $140-million pay package awarded to former New York Stock Exchange head Dick Grasso by a committee that included Paulson. Although Grasso’s pay was documented for board members and discussed at three board meetings, Paulson attended only one. According to an internal memo, Paulson supported the package, but Paulson missed the final board meeting where the package was approved. Once Grasso’s pay package became controversial, Paulson led the call for Grasso’s termination while maintaining he was always opposed to the payout. A Goldman Sachs subordinate was subsequently installed as NYSE president.

What about Paulson’s role in Goldman’s controversial acquisition of 680,000 acres of prime forest land in Chile? Goldman donated the Rhode Island-sized tract of land it acquired very inexpensively to a non-profit organization that lists Paulson’s son as a trustee/advisor. While Goldman shareholders got a lousy $35-million tax write-off for the donation, the non-profit organization received an asset potentially worth billions of dollars. The committee should have inquired as to the true value of the land and whether Paulson was looking out for the interests of his shareholders (as he was legally required) or the interests of his son’s non-profit group.

Paulson even humiliated Grassley at the senator’s own hearing.

Grassley asked Paulson for a copy of an agreement between the Nature Conservancy (which Paulson chairs) and the Internal Revenue Service. In a surreal moment, Paulson downplayed his authority as conservancy chairman—saying he was only “one member” of the board—and essentially refused to help produce the letter through the conservancy.

“And what the Nature Conservancy would prefer to do would be to have the IRS give you their closing agreement, so it would be kept in confidence,” Paulson told Grassley. Paulson, of course, will now be in charge of the IRS. So, good luck, Chuck.

Worrisomely, when Sen. Ron Wyden (D.-Ore.) asked Paulson to use his position as Treasury secretary to advance “carbon trading”—that is, global warming alarmism—Paulson dodged the question, referring to the many issues on his plate while ominously failing to invoke the Bush Administration’s heretofore avowed position against global warming alarmism.

Given that Paulson’s beloved Nature Conservancy supports global warming alarmism, the exchange raised questions as to where Paulson’s loyalties lie.

Grassley’s desire to please the White House prevented the committee from asking important questions about Paulson’s apparent penchant for lame excuses, conflicts of interest, potential ethical lapses, and avoidance of responsibility. Let’s hope Grassley’s lack of due diligence doesn’t come back to haunt the rest of us.