VentureBeat

Henry Paulson, former chief executive of Goldman Sachs, has undergone an ideological transformation during his two-year tenure as U.S. Treasury Secretary. He came in as a free market believer and has subsequently supervised one of the largest federal interventions ever in the finance industry.

Now he’s talking about it, to the Washington Post. The first of a two part series featuring his evolution has been published today; it paints him as a pragmatist, someone who changes his beliefs based on the circumstances he faces. For example, on general finance-industry regulation, he tells the Post that “I’ve realized how flawed it is and how imperfect, but how necessary it is.”

Here are some key takeaways for our investor-focused readers.

Paulson apparently came to find The Sarbanes-Oxley Act reasonable once he got into office in 2006. Here in Silicon Valley, the Act has isn’t too popular: It has increased regulations and expenses for publicly-held companies, thereby making it harder for privately-held tech companies to go public.

Even from the beginning of his tenure at the Treasury, it was clear that Paulson might break the mold. When he accepted the administration position in the summer of 2006, his allies on Wall Street urged him to revise the Sarbanes-Oxley Act, which was adopted in 2002 in response to a string of accounting scandals at Enron and other firms. The legislation had increased accountability for public companies but at some expense to their bottom line.

Upon reviewing the act closely, Paulson said, “I could not find a single idea in it that was wrong.”

Paulson has developed a newfound belief that the hedge fund industry needs to be much more highly regulated, along with non-financial industries.

Treasury Secretary Henry M. Paulson Jr. had a stern message for more than two dozen of the nation’s most powerful hedge fund managers gathered in the third-floor conference room near his office.

Paulson told them it was time to begin regulating the opaque realm of hedge funds, reversing his long-held opposition. “You should not be thinking about how to fight it but how to make it work,” he recounted telling them at the meeting last month.

They were stunned. One manager recalled muttering as he walked out: “What happened to the Hank Paulson we knew?”

[Paulson photo via The Washington Post.]

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