I've stood up for Hank Paulson a few times these last several weeks, but this Times piece from yesterday strikes me as a real problem. As Tom Coburn would say, Paulson has some 'splainin' to do at the very least.

Mr. Paulson’s schedules from 2007 and 2008 show that he spoke with Mr. Blankfein, who was his successor as Goldman’s chief, 26 times before receiving a waiver.

On the morning of Sept. 16, 2008, the day the A.I.G. rescue was announced, Mr. Paulson’s calendars show that he took a call from Mr. Blankfein at 9:40 a.m. Mr. Paulson received the ethics waiver regarding contacts with Goldman between 2:30 and 3 the next afternoon. According to his calendar, he called Mr. Blankfein five times that day. The first call was placed at 9:10 a.m.; the second at 12:15 p.m.; and there were two more calls later that day. That evening, after taking a call from President Bush, Mr. Paulson called Mr. Blankfein again.

When the Treasury secretary reached his office the next day, on Sept. 18, his first call, at 6:55 a.m., went to Mr. Blankfein. That was followed by a call from Mr. Blankfein. All told, from Sept. 16 to Sept. 21, 2008, Mr. Paulson and Mr. Blankfein spoke 24 times.

At the height of the financial crisis, Mr. Paulson spoke far more often with Mr. Blankfein than any other executive, according to entries in his calendars. ...

They do not reflect calls he made on his cellphone or from his home telephone.

According to the schedules, Mr. Paulson’s contacts with Mr. Blankfein began even before the height of the crisis last fall. During August 2007, for example, when the market for asset-backed commercial paper was seizing up, Mr. Paulson spoke with Mr. Blankfein 13 times. Mr. Paulson placed 12 of those calls.

By contrast, Mr. Paulson spoke six times that August with Richard S. Fuld Jr. of Lehman, four times with Jamie Dimon of JPMorgan Chase and only twice with John Thain of Merrill Lynch.

I doubt there was any malign intent on Paulson's part (though who knows...). When you're desperate for information, you call who you know, and Paulson knew Blankfein and Goldman. Still, even if Blankfein's motives were entirely pure, that still means Paulson was overwhelmingly getting the Goldman view of the world throughout the crisis, which only occasionally overlapped with the view from the financial sector generally, to say nothing of the public interest.

What to do about these situations is a completely vexing publicly policy issue. If you talk to people at Treasury without Wall Street backgrounds, they'll tell you there's no way to get through these situations without Wall Street alumni around. They (the non-Wall Street people) just don't know enough about how big financial institutions work, and about the ins and outs of their balance sheets, to figure out what the hell is going on. (And these are very smart people.) 

Problem is, you can have all the ethics rules you want, but in a crisis, Treasury officials are going to worry first about stabilizing the financial system, which means they're going to make lots of Paulson-esque phone calls to former colleagues and deal with the consequences later. I think the answer is probably to make them accountable after the fact--that is, have Congress or some independent oversight board subpoena their conversations with former colleagues and put the burden on the official to show they weren't favoring their former institution. But even that's not perfect. As I say, you can be powerfully influenced by someone's self-serving assessment of a crisis even if they're not explicitly hitting you up for a favor--which is to say, even in a conversation that would pass muster after the fact. And there's a risk that government officials would be too cautious in seeking information if they knew their conversations would be disclosed later on.

That said, I think the more likely upshot is that the Wall-Streeter-cum-Treasury-official would substitute a certain number of calls with people who weren't colleagues for calls with people who were, which is what we want.