The anatomy of a rumor.

Here's the latest example of how the gossip mill works in Washington, D.C. Soon after being confirmed as Treasury Secretary, former Goldman Sachs chief executive Hank Paulson made a beeline for China. Paulson's goal: to make clear to the world that helping to mature and deepen the U.S.-China financial relationship is at the top of his list of official priorities. What surprised White House insiders was that instead of using Treasury's normal channels for organizing the trip, Paulson reached out to Deborah Lehr, a China expert and the wife of former Goldman colleague John Rogers. Rogers incidentally is well known in Washington as one of the top aides to James Baker when he was Treasury Secretary in the late 1980s. Lehr was told that in the new Paulson Treasury, all things related to China would go through her office.

Rumors began swirling around the U.S. capital when Lehr, just arriving back from the initial China trip last September, abruptly resigned. "Paulson's overbearing management style was just too much for her," one reporter argued with certainty over dinner. "Paulson's pulling his punches on the Chinese currency issue," a newsletter writer on China insisted, so she resigned. A conservative political magazine suggested she was found to be too liberal for a Republican administration. One observer casually suggested that Rogers himself was upset at the potential international travel schedule his wife would be forced to undertake with small children back home.

Turns out that none of the rumors panned out. Lehr resigned simply because new financial disclosure regulations insist that even those jobs such as Lehr's not requiring a Senate confirmation would require the disclosure of the spouse's financial holdings and the elimination of any holdings that would provide even a hint of conflict. "As a partner at Goldman Sachs, John would have faced a nightmare unwinding his financial situation to try to comply with the new requirements," a Treasury official told TIE. "In the end, there was no way to be totally pure at meeting any and all potential conflict, so she preferred to resign and to offer advice if asked informally from the outside. And all that for a non-confirmation job?"