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Former Treasury Secretary Paulson Tipped Off His Banker Buds About Impending Government Actions

 
 
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 Bloomberg Newshas another shocking story today about financial elites sharing insider information at the highest levels.

It's the story of how Henry Paulson, former Secretary of the Treasury, essentially tipped off his old cronies in the finance industry about the impending government takeover of Fannie May and Freddie Mac. The story describes the scenario, which while not technically illegal according to the story, is deeply ethically troubling:

Over sandwiches and pasta salad, he delivered that information to a group of men capable of profiting from any disclosure.

Around the conference room table were a dozen or so hedge- fund managers and other Wall Street executives -- at least five of them alumni of Goldman Sachs Group Inc. (GS), of which Paulson was chief executive officer and chairman from 1999 to 2006. ...

 The secretary, then 62, went on to describe a possible scenario for placing Fannie and Freddie into “conservatorship” -- a government seizure designed to allow the firms to continue operations despite heavy losses in the mortgage markets.

...[A] fund manager says he was shocked that Paulson would furnish such specific information -- to his mind, leaving little doubt that the Treasury Department would carry out the plan. The managers attending the meeting were thus given a choice opportunity to trade on that information.

At Reuters, Felix Salmon has some choice words to explain just what all this new information implies:

 

...now I think he was downright pathological in giving inside information to his old Wall Street buddies. And the crazy thing is that we have no idea how many of these meetings there were, or how long they went on for — ...Paulson was giving inside tips to Wall Street in general, and to Goldman types in particular: exactly the kind of behavior that “Government Sachs” conspiracy theorists have been speculating about for years. Turns out, they were right.

 

This is the kind of information that makes the question "why Occupy Wall Street, why now?" seem laughable.

AlterNet / By Sarah Seltzer

Posted at November 29, 2011, 4:46am