Then the economy and financial markets started coming unhinged.
Paulson wouldn't comment for this article, but David Nason, assistant Treasury secretary for financial institutions, explained Paulson's current willingness to advocate government action: "These are the cards he's been dealt. He's handling this in a very pragmatic, results-oriented way."
Indeed, Paulson's pragmatism, together with the fact that the Democrats control Congress, has allowed the Treasury secretary to do something his two immediate predecessors, John W. Snow and Paul H. O'Neill, were never able to do: pursue an agenda substantially independent of the White House.
Like Paulson, Snow and O'Neill had big reputations based on having run big corporations. But Snow and O'Neill quickly found themselves overruled or disregarded by the president's close advisors.
Paulson by contrast, after initially embracing such administration touchstones as the need to extend the president's 2001 and 2003 tax cuts, has appeared to go almost entirely his own way. He has become the administration's most prominent voice on economic matters, at times even drowning out Bush.
"He and Bernanke have teamed up to help reality to break through the ideological field" of the waning administration, said Rep. Barney Frank (D-Mass), chairman of the House Financial Services Committee, referring to Federal Reserve Chairman Ben S. Bernanke. Frank has worked closely with Paulson.
Despite his comparative independence, Paulson has been slow to chart courses that would rub the White House the wrong way or offend key Republican constituencies.
For example, his aides say Paulson was vividly aware of the danger of financial freeze-ups well before the current crisis and ordered up plans to handle such an occurrence. "He told us over and over that every seven to 10 years, our capital markets undertake a financial shock, and we have to be ready to respond," Nason said.
However, a close look at key Paulson speeches suggests that the Treasury secretary's chief concern was saving companies money and ensuring that the financial services industry remained globally competitive -- hardly firebrand stuff for someone from Wall Street.
His goal does not appear to have been preventing the sort of repeated market clutches the country has suffered since last summer. Even as the financial markets began deteriorating in August, with the value of mortgage-backed securities falling precipitously, Paulson did not go beyond trying to orchestrate voluntary efforts by the industry.
