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This isn't to imply or allege that Henry Paulson is acting out of loyalty to his friends in the investment banking industry (though this is not an unreasonable inference given the facts). However, think of the example of a judicial trial. When a judge has financial conflicts of interest - or even former conflicts of interest that might be seen as inappropriate - that judge is supposed to choose recusal, and hand the trial off to a judge without such conflicts of interest. Failure to do so may even lead to a new trial down the line.
Henry Paulson is the former Chairman and CEO of Goldman Sachs - a position he held from 1994 to 1998 - and which capped off a career at the company which began in 1974. He still receives tens of millions of dollars per year in compensation from Goldman Sachs, as per his contract at retirement. Furthermore, as Goldman Sachs's chairman, he made over 70 trips to China, developing deep and intimate business relationships with many officials and executives in that country.
With this history, I would argue that Paulson should recuse himself from the position of Treasury Secretary, due to the sensitivity of the ongoing financial crisis, and the way that the investment banking industry - including his former firm - is involved.
If Paulson refuses to recuse himself, President Bush should act to dismiss him. As a cabinet member, Paulson serves at the sufferance of the President. The President may dismiss and replace him at any time. In this case, if Paulson refuses to leave his post, I believe that President Bush should fire him and replace him with someone who does not carry the same appearance of bias.
What do others think? Why hasn't the President already done this?
I don't know tablemtn, according to this article it appears his compensation was terminated when he accepted the Treasury position, and that his assets were required to be placed in a (blind?) trust:
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