The string of high-profile resignations from the George Bush White House is beginning to bear the hallmark of rodents leaving a sinking vessel. True, some walked the plank. But at least one man who jumped ship is an outstanding negotiator that the administration could ill afford to lose.
Deputy Secretary of State Robert Zoellick has quit the corridors of power in favour of the plush carpets of investment bankers Goldman Sachs. His boss, Condoleeza Rice, had charged this Asia-savvy 52 year-old with managing the US relationship with China.
He was the architect of a more engagement-based strategy designed to shape rather than contain the fast-growing country.
Inclusive attitude
Zoellick coined the phrase "responsible stakeholder" to explain the aim of encouraging China to cooperate with Washington on a global basis. Like the former Federal Reserve Chairman Alan Greenspan, he leaned towards a less shrill debate with China on trade and currency issues.
He spent four years at cabinet level as US trade representative and was a key figure in the negotiations that brought China and Taiwan into the WTO.
His departure leaves a big hole in Bush’s Asia policy team at a critical time in geopolitics. Jeffrey Bader, a former member of the National Security Council, told Bloomberg: "I don’t see anybody else who could step into Zoellick’s shoes, because there is no one in the administration that understands China." That is a big call.
But there was some supporting evidence from Beijing. In an unusual move, China’s Vice Foreign Minister Dai Bingguo personally telephoned the outgoing US official thanking him for his efforts on Sino-US relations. Reportedly Zoellick was ready to leave earlier this year, but felt he should stay until after Chinese President Hu Jintao visited Washington in April.
Zoellick’s departure has inevitably been tied to thwarted ambitions of higher office.
Once tipped as the new World Bank President, he saw that job go to neocon Paul Wolfowitz. Zoellick was disappointed that he was not made US Treasury Secretary in place of the ineffectual John Snow. Instead Bush reached outside the government to appoint Henry "Hank" Paulson, chairman and CEO of Goldman Sachs.
It would not be surprising if the world’s biggest investment bank installed revolving doors at Number 600 Pennsylvania Avenue in Washington.
Current White House chief of staff Josh Bolton is an alumnus of Goldman. Paulson’s three immediate successors as CEO left to join the government, including Robert Rubin who served with distinction in the Clinton administration for five years.
The 60 year-old Paulson is a devout Christian Scientist and has worked at Goldman for more than half his life. He will be giving up a compensation package that was worth US$37 million last year. And he must divest himself of his 4.6 million Goldman shares worth about US$480 million, which make up the bulk of his fortune put at US$780 million.
There have been richer men in the White House, but not many. The Senate endorsed his nomination in record time and he started work on July 1.
Robert Zoellick will be moving to New York at about the same time, bringing his vast experience as a public service insider to the top Wall Street group. He will chair its 25-member international advisory group, with particular emphasis on China.
Simply known as "the firm" to clients and 22,000 employees around the world, Goldman’s net income jumped 24% to US$5.7 billion last year, on revenue boosted 45% to US$43.4 billion.
There was one small, uncharacteristic blip. Goldman was the strong favorite to win the mandate to lead a US$12 billion IPO for Industrial and Commercial Bank of China (ICBC), scheduled for the autumn.
For a while, it looked in the bag. Hank Paulson, on the most recent of his 70 visits to China, often met with Jiang Jianqing, chairman and president of ICBC. Jiang’s daughter had worked as an intern at the Goldman office in New York. And the firm had assembled a group to buy a cornerstone 7% stake in the bank for US$2.6 billion.
Goldman was nonplussed to learn that it had been frozen out of the deal entirely, the gig going to four rival investment banks, plus an ICBC subsidiary in Hong Kong.
Damaged reputation
The loss of face in missing out on the jumbo deal was more important than the hundreds of millions of dollars in fees involved. Goldman was back in the saddle almost before the fall, taking the lead in the successful Bank of China IPO in June.
The New York giant was an early mover in China. It is the only foreign firm so far to have a securities trading platform in the country. In the process it rescued the scandal-ridden Hainan Securities with a cash injection and launched a new joint venture, Gaohua Securities.
The revival of the Chinese domestic stock markets could not have come at a better time. Goldman Sachs Asset Management has just launched a US$200 million offshore equity fund that will invest only in the yuan-denominated A-share markets.
Robert Zoellick is a big catch for Goldman. The group has embarked on a global program of massive infrastructure investments in privatized assets, including airports and cargo ports.
As a seasoned diplomat, and a Harvard-trained lawyer, Zoellick is the ideal man to open doors and lead delicate negotiations with corporations and governments.