In a notable coup that could revive his flagging administration, President George Bush has persuaded Henry "Hank" Paulson, the chairman of Goldman Sachs, to become the US Treasury Secretary.
The announcement, which took the markets and most financial analysts by surprise, was made by Mr Bush at the White House during a ceremony attended by Mr Paulson and John Snow, the outgoing Treasury Secretary, who signalled his intention to step down just before the Memorial Day weekend.
The changeover is the latest, and perhaps the most important, step in the makeover of the Bush administration since Joshua Bolten took over as the President's chief of staff six weeks ago. Since then a new CIA director and a new White House spokesman have been installed, while the powers of Karl Rove, Mr Bush's top political adviser, have been reined back.
Mr Bush described Mr Paulson yesterday as a man with "a lifetime of business experience" and an "intimate knowledge of securities markets". That positive sentiment was echoed by both political parties here, making his speedy confirmation by the Senate a certainty.
Charles Schumer, a member of the Senate Finance Committee, was just one senior Democrat who promised to support Mr Paulson, praising the nominee as "the best pick America could have hoped for". The 60-year-old, an avid nature lover who has led Goldman Sachs since 1999, will need all the qualities attributed to him in his new job - that will pay barely $200,000 (£107,000) a year compared with his remuneration of $38m last year at the helm of arguably the world's most powerful investment bank.
He hinted yesterday at the difficulties ahead, noting the current robust growth of the US economy, but warned that "we cannot take it for granted". America, Mr Paulson said, had to take steps to maintain its competitive edge. Although GDP expanded by a 5 per cent annual rate in the first quarter of 2006, that pace is likely to slow. US consumer confidence slipped last month, while inflationary threats are growing, not least because of soaring energy and commodity prices. The biggest long-term problem, however, will be managing - and if possible reducing - America's huge "twin deficits": the federal budget deficit of some $350bn, but above all the deficit of $800bn as measured by the current account, the broadest overall guide to US financial dealings with the rest of the world.
The external deficit is financed by massive purchases of US securities by the Chinese, Japanese and other foreign central banks. The fear is of a possible dollar sell-off that could destabilise the global financial system. The dollar fell against most major currencies yesterday before recovering slightly on the news that Mr Paulson - and not Donald Evans, the former commerce secretary - had accepted the job. Analysts said that the arrival of Mr Paulson will not affect the unspoken Bush administration policy of allowing the currency to fall gently, as the best means of restoring US competitiveness.
Mr Paulson's likely successor at Goldman Sachs is the bank's chief operating officer, Lloyd Blankfein, and analysts said they expected a smooth transition as soon as Mr Paulson is confirmed at the Treasury. Mr Blankfein is another Goldman lifer, having joined the bank in 1982. He was head of the company's trading businesses until his appointment as Mr Paulson's No 2 in 2004.
His elevation to chief executive would cap the growth of Goldman's trading divisions, which have eclipsed the bank's work giving financial advice. The trading divisions accounted for 66 per cent of net revenues in the first quarter of the year.
Goldman's lifer with task of putting America's economy back on even keel
Hank Paulson told Goldman Sachs staff in an internal memo that answering the President's call to become Treasury Secretary had not been an easy decision. That's hardly surprising, really, as he has given 32 years of his life to the investment bank.
All the signs were that he was initially reluctant to make the move to Washington, and it wouldn't just have been because of the risk he is joining at the fag-end of an administration that has little remaining political capital.
He was reluctant enough to uproot from his native Illinois in 1994 after being appointed to the No 2 job at Goldman Sachs. Before that, he and his wife, Wendy, had built a life on a five-acre site carved out of the family farm, where the couple raised raccoons, alligators and turtles among a menagerie of other animals, as well as two children. Now he will also have to forego the bird-watching rambles the couple take in New York's Central Park before he heads into the office in the morning.
In a parallel life, he would have been a park ranger, he says. Indeed, he has indulged his love of wildlife even while climbing to the top of Goldman. He will often show off birds of prey in the company's offices, and harangue colleagues and business associates into donating to the Nature Conservancy, the environmental group of which he is vice-chairman. Having turned 60 earlier this year, his thoughts were already turning to a retirement which would probably have included ploughing his fortune - which was augmented by $38m (£20m) in pay and bonuses last year - into additional charity work.
His green credentials have led Mr Paulson into controversy recently. Goldman shareholders criticised the bank's donation of 680,000 acres of ecologically sensitive land on the Chilean island of Tierra del Fuego to the Wildlife Conservation Society, a charity to which Mr Paulson's son Merritt is an adviser. His lifelong advocacy of environmental issues will also make Mr Paulson stand out in a sceptical Bush Cabinet.
Mr Paulson is also a surprising choice for Treasury Secretary for another reason. While heading Goldman makes him undoubtedly the pre-eminent banker on Wall Street, he is not known as the smooth public speaker the job would apparently require, and shuns the cocktail party circuit beloved of more social chief executives. His forte is behind-the-scenes power-broking.
He emerged victorious in the power struggle with Jon Corzine, who was forced out as joint chief executive with Mr Paulson in the run-up to Goldman Sachs' flotation in 1999. And two years ago, he was instrumental in ousting Dick Grasso as chairman of the New York Stock Exchange, and installing his protégé, John Thain, as a replacement with a brief to modernise the exchange.
Mr Grasso still refers to Mr Paulson as a "snake". Mr Paulson says snakes are among his favourite animals.
Stephen Foley in New YorkReuse content