Paulson is a reluctant dragon

As Treasury secretary, he has become the Bush administration's point man and chief spokesman on a series of government interventions in the economy -- including the plan likely to be approved by Congress to put the full resources of the U.S. Treasury behind faltering home mortgage giants Fannie Mae and Freddie Mac.

But if Paulson's new role irritates conservatives and clashes with his long-standing faith in unfettered markets, the question is how the former chief executive of Goldman Sachs will react if the economy develops new or deeper problems, as it has repeatedly during the last year.

From his earliest response to the subprime lending debacle to the Freddie-Fannie rescue operation, Paulson has been widely seen as a reluctant dragon. Critics say he has been slow to act and sometimes appears more concerned about shoring up financial markets than helping ordinary citizens.

"He's a man who came in with one agenda and is having another one forced upon him by circumstances," said T.J. Marta of RBC Capital Markets in New York. "He's in full defense mode at this point."

So ready has Paulson become to support government intervention in the face of economic crisis that last week he offered only the barest comfort to members of Congress worried about open-ended federal support for Fannie and Freddie. If the commitment is sweeping, he suggested, the Treasury might not have to use its new power.

"If you've got a bazooka and people know you've got it, you may not have to take it out," he said.

That's a big change for a man who came to the nation's capital after three decades at Wall Street's premier market player. He became Goldman Sachs' chairman and chief executive in 1998.

During his Senate confirmation hearing in 2006, he offered a paean to the private sector and financial markets, lauding them as "a model of strength, flexibility, dynamism and resiliency."

His top domestic goal, he said, was to revive President Bush's efforts to partially privatize Social Security by creating individual investment accounts.

But events moved quickly against Paulson.

Within less than a year, the Democrats took over both houses of Congress. And the Social Security proposal proved so unpopular with politicians and the public that in pushing it, Paulson told one interviewer, he felt as though he was "playing solitaire."