Former Treasury Sec. Allegedly Gave Hedge Fund Managers Insider Info. Before ‘08 Crisis
- Posted on November 29, 2011 at 11:23pm by
Becket Adams
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The actions that led up to the financial crash of 2008 were arguably filled with errors and miscalculations. However, what many Americans are just starting to find out is the fact that several individuals involved in the crash either profited or otherwise behaved in a fashion that many would view as criminal.
Add former Treasury Secretary and Goldman Sachs CEO Henry “Hank” Paulson to the list of implicated crash-related individuals.
Richard Teitelbaum of Bloomberg has just published what some have referred to as a “bombshell” report that claims (via Business Insider):
. . . in July 2008, then-Treasury Secretary Paulson met with several hedge fund managers and told them that a government takeover of Fannie Mae and Freddie Mac was a very real possibility.
Why is this shocking? Consider the fact that just a week before informing hedge fund managers that the Fed would be moving in on Fannie and Freddie, Paulson testified before the U.S. Senate (as well as various media outlets) that government intervention in Fannie and Freddie was near “impossible.”
And of course the government did indeed intervene on behalf Fannie and Freddie, at a great cost to the taxpayer.
Business Insider reports:
. . . the group of managers could have profited off the the information Paulson gave them, but it is not clear if the hedge funders at the meeting were trading Fannie and Freddie shares at the time and it is near impossible to track “firm-specific short stock stales” using public documents. There has been no evidence that the managers traded on Paulson’s information.
These facts have led various law professors to conclude that, although questionable, Paulson did not explicitly engage in illegal behavior.
But it doesn’t change the fact that he disclosed sensitive, non-public information to a group of men who stood to profit from said disclosure.
William Black, associate professor of economics and law at the University of Missouri-Kansas City, “can’t understand why Paulson felt [compelled] to share the Treasury Department’s plan with the fund managers,” reports Bloomberg.
“You just never ever do that as a government regulator — transmit nonpublic market information to market participants,” says Black, who’s a former general counsel at the Federal Home Loan Bank of San Francisco. “There were no legitimate reasons for those disclosures.”
Janet Tavakoli, founder of Chicago-based financial consulting firm Tavakoli Structured Finance Inc., says the meeting fits a pattern.
“What is this but crony capitalism?” she asks. “Most people have had their fill of it.”
Needless to say, for a government official to leak market-sensitive information, even if by accident, is highly suspicious and oftentimes unethical.
“There’s a lot of government information out there, and the hedge funds are trying to get it,” says Richard Painter, a law professor at the University of Minnesota who advised the Bush administration on Paulson’s sale of his Goldman stock when he became Treasury secretary. “It’s a huge problem that has to be addressed.”
As Peter Schweizer has pointed out in his new book “Throw Them All Out,” various members of Congress have also been legally profiting from private market information.
How is it legal?
“The rules for what can or cannot be disclosed by government officials are often either unclear or nonexistent,” writes Teitelbaum.
Makes sense. Think about it: if you are a government official engaging in behavior that otherwise would be illegal, but is only legal because you “failed” to make a law against it, what are the voters going to do? Call a cop?
“The bottom line is that senior-level people in Washington, in the name of keeping in touch with their stakeholders, are tipping their hands,” says Adam Zagorin, a senior fellow at the Project on Government Oversight, a Washington watchdog group, in the Bloomberg article.
“You can’t prosecute them for insider trading if they didn’t trade the shares. You may not be able to even reprimand them. What the hell are the rules?”
Some argue that there is no case against Paulson.
An official such as the former Treasury Secretary has no legal obligation to keep material nonpublic information to himself, says Phillip Kaplan, partner for litigation at Manatt Phelps & Phillips LLP, where he specializes in securities and class-action cases.
“I don’t think a government person is liable,” he says. “He didn’t profit from the information or trade on it.”
Nevertheless, Paulson’s actions (along with several others [Pelosi, Boehner, Bachus, Kerry, et alia]), has started a national conversation on the limits of political privilege in regards to the market.
“In the rapidly evolving world of insider-trading prosecutions, [the rules for politicians] could change,” says the University of Illinois’s Ribstein, adding that the U.S. Securities and Exchange Commission is retooling the laws regarding insider trading. “SEC Enforcement Director Robert Khuzami, who can bring only civil cases, and the Justice Department, which can mount criminal prosecutions, have cast their net wide,” Ribstein says.
Was Paulson’s admission just an honest mistake or is this just another reminder that many in Washington D.C. believe they are above the law?
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Comments (95)
chance1
Posted on November 30, 2011 at 4:02amI feel all has been said is done. Eththeir we stand as one and Demand an egress to our grieavans. AS one solid vocie or they will ignore us as allways.
Report Post »THE TRUTH SHALL MAKE YOU FREE
Posted on November 30, 2011 at 4:28amThis is the EXACT reason Most people our Occupying everything including wall street, This is business as usual for most of these crony capitalists becausethe system rewards them because they give big donations to the corrupt politicians that give them loopholes and special laws for campaign donations etc..
Report Post »000degrees
Posted on November 30, 2011 at 6:41amnothing is against the law…if you are part of the “ruling class”
Report Post »techengineer11
Posted on November 30, 2011 at 7:19amI tried to tell you but you wouldn’t listen!!!! I won’t say I told you so… lol
Now do we begin to understand why they have all the money? lol
Report Post »Pujols
Posted on November 30, 2011 at 7:57amWhat Hank did is 1000 x worse than Martha Stewart. He should get at least 100 x what She did in
Report Post »‘Jail Time’ with the big boys. Not some Wussie jail for the Special. This is Bull Crap.
whywonder
Posted on November 30, 2011 at 8:12amOf course he did, he is a conservative republican. Post it moderator…hank paulson is a conservative republican…I think blazers are afraid of the fact that they are the wrecking balls of the american system.
Report Post »techengineer11
Posted on November 30, 2011 at 8:26amPujols: Will never happen… He’s the chosen! That’s the way the system is suppose to work.
Report Post »Luke21
Posted on November 30, 2011 at 8:44amWhy is this even news? Seriously, we are just NOW figuring out that Paulson & crew are crooks, & the 08 bailout was a massive theft of wealth from the middle class by the crooked class? And since when HASN’T fannie & freddie been “owned” by the federal gov’t? This has NOTHING to do w/ capitalism. It has everything to do w/ forgetting that we are a nation of laws (not men) and failing to hold those who break the law accountable for their actions.
“Say to the righteous that it shall be well with them, For they shall eat the fruit of their doings. Woe to the wicked! It shall be ill with him, For the reward of his hands shall be given him. As for My people, children are their oppressors, And women rule over them. O My people! Those who lead you cause you to err, And destroy the way of your paths.” The LORD stands up to plead, And stands to judge the people. The LORD will enter into judgment With the elders of His people And His princes: “For you have eaten up the vineyard; The plunder of the poor is in your houses.
Report Post »(Isaiah 3:10-14)
Ruler4You
Posted on November 30, 2011 at 9:34amIf you are as naive as to believe that this doesn’t go on at all levels of government you are sadly mistaken. If this was being done at the corporate level we’d call it “White collar” crime and prosecute them.
But, instead, it’s our government. We’re supposed to be able to trust them. Instead, they added fuel to the fire. Now, IMHBLO, this crap is right out of the KGB skool of criminal government. And they get off scott free.
Report Post »Jaycen
Posted on November 30, 2011 at 12:27pm@THE TRUTH SHALL MAKE YOU FREE
No, that’s not true. This is not the “exact reason” the occupiers are protesting. If it was, they’d be protesting the government. The naughty one here was a federal regulator. Get it?
The exact reason the occupiers are protesting is they are the useful idiots for Communist professors who want to see a more Socialist America with themselves installed as philosopher kings.
Idiot.
Report Post »Jaycen
Posted on November 30, 2011 at 12:30pm@whywonder
I’m so sick of Progressive Socialists trying to conflate philosophy with party.
There are Liberals and Conservatives. There are Republicans and Democrats.
The Republican Party has Conservatives and Liberals in it. The Democrat Party also has Conservatives (albeit very few) and Liberals in it.
A Conservative doesn’t behave as Paulson did. This is why Conservatives always eject people like this from their ranks. This is Liberal behavior, which is why Liberals embrace people like Paulson, and then blame someone else, like all of Wall Street.
Please stop douching in public. Thanks.
Report Post »Tower7_TRUTH
Posted on November 30, 2011 at 1:01pmtower7femacamp was all over Hank Paulson long ago
http://www.theblaze.com/stories/chicago-union-boss-scores-massive-158000-public-pension-after-being-rehired-for-only-one-day/
maybe that’s why he is banned
Report Post »Wilbur D Pig
Posted on November 30, 2011 at 3:23am“I don’t think a government person is liable,” he says. “He didn’t profit from the information or trade on it.”
HA! The defenition of ‘profit’ has more than just monetary implications. There are numerous ways he, or others close to him could profit from sharing that intel.
Report Post »Bill in Texas
Posted on November 30, 2011 at 9:26amI agree, look where he’s working now. Imagine that? He did profit in a big way.
Report Post »pamela kay
Posted on November 30, 2011 at 2:44amThey should all be held accountable and have to repay those who have lost money. I am sure that they have tidy little sums of money stashed away. I don’t support hanging or a fireing squad, but I do believe that they should be punished with long term jail time. I bet if we had all of that money back we might turn things around in the economy. The GOP needs to run with this information. The Progressives like to ruin peoples lives simply because they disagree with them. They end any hopes of political carreers for so many conservatives, it is time to end a few of theirs, as well as any GOP that took advantage of the situation.
Report Post »The-Monk
Posted on November 30, 2011 at 2:18amA jail cell next to Bernie Madoff is about right.
Report Post »Walkabout
Posted on November 30, 2011 at 8:25amTalk show host Jerry Doyle calls the former treasury secretary SHIFTY Paulsen.
The most damning thing I have heard Bush say was that he did not know finance & relied on Paulsen.
John McCain (McShame) was just as bad if nor worse. He said he didn’t know finance, but didn’t he sit on the finance committee? I support Bush on the War against terrorism. I slept better knowing that it was him prosecuting the war instead of “release my chakra” Gore or “I served in Vietnam” Kerr, who inflicted injuries upon himself to get 3 purple hearts & a ticket home.
I give Obama high makes for PERSONAL finance. When he was state senator he got his wife a $200,000+ job at a hospital as a community coordinator. He got Rezko to sell him land at below market prices. His adviser Valerie Jarrett is no better. She is a slum lord.
Report Post »Walkabout
Posted on November 30, 2011 at 8:29amIf the U.S. collapses Paulson is si9tting in his ‘manor house’ away from the civil unrest, where he could emerge as a ‘duke’ in a post collapse America, much as the Roman nobility did A.D. 476.
Report Post »Cold War Vet
Posted on November 30, 2011 at 1:55amI’d like to see George Soros and Paulsen swaying beside each other in the breeze…
Report Post »Dagger82
Posted on November 30, 2011 at 2:46amJust our luck ~ we‘ve only got Holder’s Justice (?) Department to turn to. But, I have to admit you provided the best mental image I’ve had all day. Thanks.
Report Post »kryptonite
Posted on November 30, 2011 at 3:13amDitto. Bush’s worst mistake was not Iraq. It was appointing Paulson as Treasury Secretary. Paulson is a filthy Obamite and a traitor. He lied to Congress to get TARP approved, and then spent the money like a dictator to control the banks for Obum. Soros, Barack Hussein and Paulson are all guilty of financial terrorism against America.
Report Post »chance1
Posted on November 30, 2011 at 3:53amThe only way in hell that would happen is , if the Patriots made it happen no other way to make it right.
Report Post »spfoam1
Posted on November 30, 2011 at 8:13amWe share a vision…..I’d like to see a few others swinging in the breeze next to them.
Report Post »Walkabout
Posted on November 30, 2011 at 8:36amI agree. Paulson & Tarp were Bush’s worst mistake.
Report Post »Casualties in Afghanistan started rising as soon as we pulled out of Iraq. Al Qaeda & people suing them as proxies only have so many resources. They could not sustain high tempo fights in two regions. Post 2007 we were doing well in Iraq. Casualties were declining. The equipment was vastly improved to counter roadside bombs. Intel was great. The Libyan rebels who had fought in Iraq lived to tell about only because they left the fight. if they had stayed more than a year, we would never have heard about them. But we threw it all away.
Randyrocker
Posted on November 30, 2011 at 1:46amDeserves to go to jail for life with no parole whatsoever. This monster has through his deceit nearly destroyed the entire United States economy. In any other country he would be taken outside and forced to face a firing squad. In the United States he can be placed on trial and forced without plea bargaining to expose all of those involved with the criminal activities he engaged in. Who else was privy to this inside information that was misused by the administration, considering Hank Paulson was the former Secretary Treasurer.
Report Post »chance1
Posted on November 30, 2011 at 3:30amI hate to tell ye that is to be thy that takes the up the arse. Un Till we the people stand and deliever. Untill then it is just words, angry words in cyber space, No one will hear unless real words of anger are spoken. say it ant so. I dare you.
Report Post »lapitup
Posted on November 30, 2011 at 1:09amALL I GOT TO SAY IS MARTHA STEWART! LETS SEE WHAT THIS GUY GETS? MARTHA STEWART WAS SMALL TIME, THIS IS BIG TIME. This is where I think the 99 percent has got it right. Where they got it wrong is because this guy is Democrate it is OK. If the 99 percent had their way we all would fall their would be nothing left and the world would be like the movie “Escape from New York”
Report Post »Chuck Stein
Posted on November 30, 2011 at 1:58amMartha Stewart is also a Democrat.
Report Post »In any event, she only lied to authorities about what she did — no underlying violation. Paulson’s conduct is not only bigger in scope, but it is clearly worse in it’s very nature.
libertytreecaretaker
Posted on November 30, 2011 at 12:54amThe only way out is to starve the political beast. We can survive and defend ourselves long enough for these political leeches to fall off and die.
Report Post »Drakkhanlord
Posted on November 30, 2011 at 12:49amHow about a show of hands of who all wanted this BS Govt shut down…?
Me and mine …yeah k few over there …some that way …
Told ya was a bunch of stupid sobs out there…
Report Post »libertytreecaretaker
Posted on November 30, 2011 at 12:48amHang this bastard!
Report Post »CatB
Posted on November 30, 2011 at 1:01amI agree .. .about time to start charging those involved with TREASON and hang them!
Report Post »Mateytwo Barreett
Posted on November 30, 2011 at 6:48amThe preferrable term may actually be “Lynch de sucka!”
Report Post »Drakkhanlord
Posted on November 30, 2011 at 12:46amPublic execution for all involved…
Report Post »Cold War Vet
Posted on November 30, 2011 at 1:54amI want a large gallows erected on the Washington Mall, and put to use!
Report Post »chance1
Posted on November 30, 2011 at 4:13amI have been always for fair trial, but this way byond that I have rope, I have Acrage and I have tree. Any questions Implicict Gov. servants. Any time you hear , officals . It should state servants. We are the officals, they the government are the servants, to us the people.
Report Post »Drakkhanlord
Posted on November 30, 2011 at 12:44amNo , no …this must be some conspiracy theory…
Welcome to reality people , might want to research some of those
crazy conspiracy theories…or you could just go back to sleep…?
People , we are on the edge…NOW , right fargin NOW…
Report Post »snooop1e
Posted on November 30, 2011 at 12:36amClearly caused by Turbo Tax
Report Post »Ghandi was a Republican
Posted on November 30, 2011 at 12:27amHang him from a tree in the OWS shanty town till they figure it out..
Report Post »Drakkhanlord
Posted on November 30, 2011 at 12:45amwith all his friends…
Report Post »Bonnieblue2A
Posted on November 30, 2011 at 12:14amCharge him with insider trading. Every count to be a seperate sentance run non-concurrent. Prison for Paulsen and those who participated at the hedge funds! Everyone of them charged NOW!
Report Post »CatB
Posted on November 30, 2011 at 1:02amCharge them with TREASON!
Report Post »NOBALONEY
Posted on November 30, 2011 at 12:12amThere are too many connections between Goldman Sacks, Federal Reserve, and the Treasury. There is one other important fact that the article never mentions. The hugh position that Goldman Sacks took against the mortgage derivatives; which destroyed Bear Sterns. Halved the Stock Market, and sent the Housing Market reeling. The usual suspects, Franklin Raines, John Kerry, Chris Dodd, Maxine Waters, Barney Frank, Hank Paulson, Goldman Sacks, Federal Reserve, and the Treasury are all part of Washington political elite, and operate both outside and above the law.
Report Post »chance1
Posted on November 30, 2011 at 3:50amYea that is fact and they daer us to stand up and say bygod that is enough. Till then they will laugh at us simpletons , Had enough.
Report Post »THE TRUTH SHALL MAKE YOU FREE
Posted on November 30, 2011 at 4:38amThe UNFEDERAL reserve is the heart of this cancer my fellow Americans, The ONLY one who really wants to stop this from continuing is Dr Ron Paul, please learn that the unfedaral reserve IS A
Report Post »PRIVATE FOR PROFIT company that has hijacked
our monetary system. END THE FED Ron Paul 2012!
Skee
Posted on November 30, 2011 at 12:11amAnother example of the govt. being to big.
Report Post »Creates bubble then throws a life line
to their buddies, while the rest of us drown.
Take away govt. power. The lobbyists, unions
and corporations automatically lose theirs.
Magically the individual regains the a chair
at the head of the table.
Cold War Vet
Posted on November 29, 2011 at 11:58pmActually, his company is Soros Fund Management.
Report Post »lukerw
Posted on November 30, 2011 at 12:07amThe RightHand never investigates the LeftHand!
Report Post »Cold War Vet
Posted on November 30, 2011 at 1:18amSad but true!
Report Post »JP4JOY
Posted on November 29, 2011 at 11:52pmThat may be the most probable reason he stepped out of the limelight so quickly after the meltdown.
Report Post »Cold War Vet
Posted on November 29, 2011 at 11:51pmI wish somebody could look into Soros Management Inc…
Report Post »Outlaw_Josey_Wales
Posted on November 30, 2011 at 7:07amGo to the white house and look under the sheets, Soros is in bed with obama!
Report Post »Cold War Vet
Posted on November 29, 2011 at 11:50pmGeorge Soros is a hedge-fund guy. He’s been convicted of wrongdoing before. Inseider trading, and financial terrorism are right up his alley. I’d love to see that slimy cockroach dragged away in handcuffs…
Report Post »broker0101
Posted on November 29, 2011 at 11:50pmAnyone who didn’t already know that Goldman Sachs has been an unofficial (essentially Organized Crime) arm of the US Treasury Department for decades is too ignorant to live. For those of you still left, PIMCO is the next name that has earned the same distinction. Don’t hold your breath for Glenn to enlighten you on that one, though.
Report Post »Walkabout
Posted on November 30, 2011 at 8:42amPut up of shut up. Some of us will look it up, but not all
You can’t write 6 sentences to sum up your accusation & start to make your case.
So cryptic. More like a weasel. You scared that some will get you or you won’t be believed?
Report Post »lylejk
Posted on November 29, 2011 at 11:45pmNow this guy I would personally love to see bunk bed with Madoff. Remember, he’s pretty much responsible for the xray machine at airports too. I haven’t forgotten this. :)
Report Post »Detroit paperboy
Posted on November 29, 2011 at 11:37pmNo way…… A corrupt govt. official ? Who da thunk it ?
Report Post »encinom
Posted on November 29, 2011 at 11:49pmactually, a corrupt republican, a W. appointee.
Report Post »libertytreecaretaker
Posted on November 30, 2011 at 12:51amDoes being appointed by W make it worse then Obama appointing turbo tax cheat Tim Geitner? I think all corrupt government officials must go or be excised!
Report Post »Kathleen
Posted on November 30, 2011 at 9:31amActually a corrupt Democrat who haplessly was appointed by the great reacher-across-the-aisle George W.
Report Post »FToth84
Posted on November 29, 2011 at 11:32pmN-O-W-A-Y!!!!! Our leaders would never do such a thing. Hard to believe. Sucks for the outsiders
Report Post »AhLeahIris
Posted on November 29, 2011 at 11:38pmYes, it does, but thanfully, Glenn and others have been telling us to prepare: http://wp.me/p1HGwx-1Co
Report Post »FToth84
Posted on November 29, 2011 at 11:55pmAmen to that!!! And my wife thought I was a loon when I started buying dried beans. Yesterday she brought home dried milk. Who’s the loon now???
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