If the Bush White House wants to understand just why conservatives are walking away from this Administration, they need only look at the disaster brewing over at the Treasury Department, where Treasury Secretary Henry Paulson is turning the federal agency into Goldman Sachs South and allowing liberal Democrats the run of the building.

By some Treasury insiders accounts, as many as 15 senior positions at Treasury may go to former Goldman Sachs employees or consultants. At least one of those jobs may already have reopened, with the sudden resignation of one of those liberal Democrats Deborah Lehr.

Lehr is well credentialed: a former Clinton Administration National Security Council adviser, a top aide to Clinton trade rep Mickey Kantor, an adviser to Paulson when he was chairman of Goldman Sachs, and an associate of former Clinton national security adviser Samuel “Sock Stuffer” Berger.

Oh, and she happens to be married to John F.W. Rogers, chief of staff at Goldman Sachs, and one of Paulson’s closest confidantes.

Lehr had been appointed to her post overseeing a strategic economic dialogue with China in the wake of Paulson’s meetings with senior Chinese officials in September. Lehr resigned earlier this week, citing “personal reasons.” Press speculation noted that she and Rogers have young children, but in the past three years, Lehr, according to associates in Washington and New York, has kept up a highly active business life outside the home.

Some questions have been raised about her association with Sandy Berger, who famously stuffed sensitive national security archived documents into his socks and literally legged them out of the National Archives while preparing briefings for the 9/11 Commission, but it isn’t clear if those close ties to Berger would have nixed Lehr’s job as a key contact for the Chinese government with the Bush Administration’s economic team.

Paulson, who has cultivated the Chinese marketplace in his former role at Goldman Sachs, was thought to be the right man to open up more cooperative discussions with the Chinese. At the time of the meetings, Paulson crowed: “The key to working with the Chinese is being able to get access to all the right people at whatever level.” Implicit in that statement was that Paulson was the man.

But inside Treasury and in some financial institutions in New York the post-meeting reviews of Paulson and his Treasury team were less than stellar. “We’ve heard the meetings were a waste of time, that the Chinese just rolled us,” says an investment banker in New York with GOP ties. “These meetings had so many Goldman people involved on different levels that the Chinese couldn’t tell if this was a government meeting or a conference with Goldman Sachs. Even some of the Treasury people I talk to say they couldn’t figure out what is going on.”

More directly, many inside Washington are trying to figure out why liberal Democrats are being given senior level, intelligence sensitive and economically critical jobs in what is supposed to be a Republican administration. “Yeah, a President John Kerry would appoint a Republican to that kind of job,” says a Republican political consultant derisively. “This would be funny if it weren’t apparent that this Administration has just completely lost its way. I’m not sure this White House understands the anger that is simmering out there, and which will become very apparent in the aftermath of this election cycle should dramatic changes take place on Capitol Hill. The Paulson thing is just one more exhibit in a long line of examples.”