Mark Brandon is the Managing Partner of First Sustainable (http://www.firstsustainable.com), a registered investment advisory catering to socially responsible investors. In addition to Socially Responsible Investing (SRI), he may opine on social venturing, microfinance, community investing, clean technology commercialization, sustainability public policy, green products, and, on occasion, University of Texas Longhorn sports.

Thursday, June 08, 2006

Environmental Cred for Bush Treasury Nominee

The President nominated Henry M. (Hank) Paulson, a Wall Street banker with serious environmental credibility, to replace outgoing Treasury Secretary John Snow. Whether Paulson will hold enough sway to get his environmental views across to an otherwise intransigent administration remains to be seen.

Since 1999, Paulson has headed perhaps THE most envied and profitable Wall Street firm, Goldman Sachs (NYSE: GS). During his 20 plus career at the white shoe firm, he accumulated a personal fortune which the New York Times estimates at $700 million. He was the overseer of Goldman's transition from the oldest partnership on Wall Street to a publicly traded corporation.

At the same time, Paulson has eschewed one of the corporate perks of executive life, seats on other corporate boards, to chair the board of The Nature Conservancy. He also serves on the board of the Peregrine Fund, which seeks to preserve the habitats of birds of prey. He has certainly put his money where his mouth is, pledging $100 million of Goldman stock to a foundation benefiting conservation efforts. Besides environmentalism, Paulson seems to have a twin passion, China. He has personally courted China's heads of state and countless bureaucrats on behalf of both Goldman and his charitable projects. Both Goldman and the Chinese have profited handsomely from the relationship, as the firm has been a leader in retaining investment banking business from all of the state-owned spin-offs, IPO's, and restructurings. Indeed, Western money, of which Goldman's has been leading, has enabled China to convert its whole society from socialist to capitalist in a little more than a decade.

It would be fair to ask why anyone who headed the world's most powerful investment bank, reaping $38 million per year (last year's compensation, not including options), would want to step into the role of Treasury Secretary. The last two secretaries both came from Fortune 100 firms, and were both relegated to minor roles within the administration. The treasury secretary does not control the money supply, nor does it set tax policy. According to Business Week, the deciding factor was Bush's personal assurances that Paulson would be the head honcho in economic matters.

It is hard to know what to make of this appointment. On the one hand, Treasury has little influence over the administration's environmental policies, and even Bush supporters would have to concede that his picks for these posts have been cynical. Paulson will most definitely be in the position to utilize his relationships with the Chinese to benefit his old Wall Street buddies. Despite putting all of his Goldman stock in a blind trust while divesting, one never really leaves that club. Witness: another Goldman executive and Clinton's treasury secretary, Robert Rubin, returning to Wall Street as head of the Citigroup Executive Committee. Further, there can not be much distancing between Paulson and the oppressive Chinese regime. China’s president, Hu Jintao counts Paulson as a personal friend, and chose the banker to host him during his recent trip to the New York Stock Exchange.

On the other hand, Paulson will be in a position to show the world's businesses and governments how to think beyond bottom line figures, how a market-based approach to conservation can work, and how wholesale liquidation of our natural resources is a loser from both a market and aesthetic perspective. Concerning his close ties to the Chinese, insisting on someone who had no ties in this day and age would disqualify most serious contenders.

This will be one to watch.

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