Too Big to Fail [29]
Much of the Treasury staff did not know what to make of Paulson and his idiosyncracies. The staffers would go to Robert Steel, his deputy secretary and a former Goldman alum, for advice on how best to interact with their quirky new boss. Steel would always tell them the same three things: “One: Hank’s really smart. Really smart. He’s got a photographic memory. Two: He’s an incredibly hard worker, incredibly hard. The hardest you’ll ever meet. And he’ll expect you to work just as hard. Three: Hank has no social EQ [Emotional Quotient], zero, none. Don’t take it personally. He has no clue. He’ll go to the restroom and he’ll only halfway close the door.”
Early in his tenure, Paulson invited some staff members to his house, a $4.3 million home in the northwestern corner of Washington (which, in a bizarre coincidence, had once belonged to Jon Corzine). The group gathered in the living room, whose big windows looking out over the woods almost made it seem as if they were sitting in a fancy tree house. Surrounding them were photographs of birds, most of them taken by Wendy.
Paulson was intensely explaining some of his ideas to the group. Wendy, thinking it odd that her husband had forgotten to offer their guests anything to drink on such a hot summer day, interrupted the meeting to do so herself.
“No, they don’t want anything to drink,” Paulson said distractedly before resuming the meeting.
Some time later Wendy came out with a pitcher of cold water and glasses, but no one dared indulge in front of the boss.
Paulson had inherited a department that was in disarray. His predecessor, John Snow, the former chief of the railroad company CSX, had been marginalized, and the demoralized staff felt both neglected and underappreciated. Paulson thought he could remedy that. But what surprised him was how few employees there actually were. He had assumed that government inefficiency would guarantee that he would have to deal with thousands of bodies being underutilized. Although he now oversaw a department of 112,000, it was light on the financial side, and he knew he would have to bring in seasoned Wall Street veterans who knew what it meant to work hard.
The Goldman connection was the one factor of which Paulson had to be mindful, as impractical as that seemed to him. He knew conspiracy theories about Goldman’s supposed influence over Washington bloomed anew whenever a top Goldman executive took a government job, whether it concerned Robert Rubin’s becoming Treasury secretary under Clinton or even Jon Corzine’s election as senator from New Jersey, despite being ousted from the firm. (Rubin, who was now at Citigroup, also reminded him about being careful in dealing with Goldman before he took the job.)
In his first few weeks on the job, as the economic clouds were gathering but no one was yet forecasting a storm, Paulson focused on improving the morale at Treasury. He visited departments that had not seen a cabinet member for years and ordered the refurbishment of the building’s basement gym. Paulson was serious about physical fitness and often biked around the capital, whenever Wendy could get him off the phone.
Early on, Paulson had concerns about the markets. In his first briefing with President Bush and his economic team, at Camp David on August, 17, 2006, he warned that the economy was overdue for a crisis. “When there is a lot of dry tinder out there, you never know what will light it,” he said. “We have these periods every six, eight, ten years, and there are plenty of excesses.”
Paulson made it clear that the administration would have to confront at least one serious problem: the subprime mortgage mess, which had already begun to have repercussions. Bear Stearns and others were deeply involved in this business, and he needed