Not for nothing is Henry "Hank" Paulson, the US Treasury Secretary, known as Hank the Hammer. He earned the nickname in his footballing days at Dartmouth College, where his toughness on the field was legendary. At 62 he retains much of his earlier stamina; being teetotal and running every day has helped him keep hitting hard.
Now Paulson is being called Super Hank, thanks to his Herculean efforts in rescuing the US from financial meltdown. Over the past six months he has stepped out of the shadows of the Treasury's grand building on Pennsylvania Avenue to become the only heavyweight figure capable of putting together some sort of lifeboat for the US economy in the dying days of the Bush administration.
This week he faces the toughest test of his two years at the Treasury. He has to persuade reluctant Republicans in Congress to accept the decision to provide a bail-out for Freddie Mac and Fannie Mae, the giant US mortgage guarantors that back up $5 trillion worth of loans on American homes.
Paulson's rescue has been hailed as a bail-out but that is the wrong way of looking at it. What he hoped to achieve last week was a confidence trick – a mirage, if you will. He wasn't saying the government would give money to prop the financiers up, but that it would if it had to: two quite different things.
It is not written into Freddie Mac and Fannie Mae's constitution, but it is implicit that the government would bail them out of trouble. In effect, Paulson was trying to restore confidence before their share prices collapsed. His intention was not to write a blank cheque.
A staunch Republican himself, Paulson doesn't want to prop up Fannie Mae and Freddie Mac with taxpayers' money, either. Indeed, it has always been one of his missions to reduce their influence in mortgage lending. But, unfortunately, some of the more intransigent Republicans on the Senate banking committee didn't get what he was trying to do. Now his biggest challenge will be not losing his rag with them; you could see how irritated he was last week after the fierce questioning. But one of Paulson's smartest achievements in office has been to keep his "brain to mouth" outbursts to a minimum – which has not been easy, as he is said to have found the Treasury's more geeky bureaucrats difficult to deal with.
Running Goldman Sachs was good training for this moment. Paulson was at Goldman for 24 years, and ran it for eight. After the bloodbath that pushed out Jon Corzine, he was a master of consensus. Until now he's built a similar consensus in Congress, transformed the Federal Reserve into the most powerful regulator in the US, managed the weekend rescue of Bear Stearns by JPMorgan and has been tireless in persuading mortgage lenders to allow homeowners to refinance, rather than foreclosing on them.
Shortly after taking office he stunned people by announcing four big action plans – reforming social security and healthcare, tackling the widening wealth gap, introducing a sustainable energy policy and improving global trade. But then Paulson is not what you would expect from a Republican investment banker, albeit married to a Democrat. He's fanatical about environmental issues, cares deeply about wealth distribution and once told a Chinese reporter that he loved his children "too much to leave them any money". Apart from a small trust to his grandchildren, he's announced that his $500m fortune will go to charity.
Paulson is the sort of man who makes you jump to attention when he walks into a room. I certainly did when I met him while he was still at Goldman, where his colleagues seemed slightly in awe of him as well. It isn't just his commanding presence or startling blue eyes or radical agenda that make him so interesting. He has a rare aura of self-composure – and he's funny too.
If Barack Obama becomes President in November, he will find Hank the Hammer extremely useful to keep on side.
French regulators check their banks for signs of 'la maladie anglaise'
According to a scoop in the French newspaper Les Echos, the country's financial authorities are carrying out secret investigations into its banks because they are so worried by their risk of exposure to sub-prime and monoline insurance.
The story claims that the AMF, the French equivalent of the Financial Services Authority, wants to know whether the information being given out by the banks on their lending to sub-prime and derivative positions is "sufficient, complete and reliable".
That's tough talking, particularly since France's Finance Minister, Christine Lagarde, has said the banks are just fine. No doubt the AMF has been looking over here during the past few months of bank fundraising.
In the AMF's sights are Calyon, the investment banking arm of Crédit Agricole, the country's third biggest bank and one of Europe's largest, and Natixis, the fourth biggest bank in France. Its investigators are also looking at hectic dealings in Natixis shares over the past few days in the run-up to its announcement that it is raising €3.7bn (£2.9bn) after the deteriorating crisis forced it to make more writedowns and look for new capital to shore up its balance sheet.
Luckily, Natixis has only a few big shareholders; the mutual and savings banks that own nearly 70 per cent of it have said they will subscribe to the new shares and underwrite the rest. Like Crédit Agricole only a few months ago, Natixis is now streamlining its investment activities and cutting back proprietary trading. Calyon and Natixis are paying the price for expanding too fast. But both are fundamentally sound.
Across the Channel, the UK's banks had their best days in weeks. After tumultuous trading, investors decided things could not get worse. HBOS finished up above its rights issue price of 275p, while Alliance & Leicester closed just above the bid price from Banco Santander as investors waited for a rival bid. I still like the look of Lloyds TSB as a suitor, and its shares are finally recovering.
These shares are made for walking: Burberry marches on
I'm not crazy about Burberry's latest must-have shoes but I do like the shares, up 62p to 462p on the week. It took a few days after Burberry announced results on Tuesday before investors realised quite how excellent they were; maybe we've all got too used to the gloom so good things take time to sink in. But Burberry keeps storming ahead, pushed by demand for all its clothes but particularly its latest funky shoes – the more over the top, the better they sell, apparently. Astonishing, really, but the US is still Burberry's best market, and sales were up by nearly a third. If Burberry can keep its classic-with-a-twist style going, then there's no reason why it can't keep growing fast in the Bric countries – that's Brazil, Russia, India and China. As Goldman Sachs forecast last week, about 70 million people are joining the ranks of the global bourgeoisie each year. That's a lot of Warrior handbags.Reuse content