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Hank Paulson Defrauded the US

Crony capitalism isn’t usually this bald. But then again, this is Hank Paulson we’re talking about.

This week, Bloomberg reported that in the summer of 2008, while serving as Treasury secretary under president George W. Bush, Paulson gave a gathering of Wall Street titans detailed, inside information about the government’s plans for the troubled mortgage giants Fannie Mae and Freddie Mac.

It was July 2008, and Paulson had been insisting in public that Fannie and Freddie would remain privately owned. In private, Paulson gave his former colleagues in the investment banking world a preview of his true intentions: The government would be taking both Freddie and Fannie into conservatorship, largely wiping out stockholders.

The generosity of the tip — which likely led the investors to short shares in the mortgage giants — shocked even the bankers, in particular Bloomberg’s source for the piece, a hedge funder:

The 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.

But no one should have been shocked that Paulson was handing out secrets worth billions behind closed doors. The record is clear: Even while he was supposed to be working as a public servant, Paulson never stopped working for Wall Street.

In July 2007, Bush tapped Paulson, then the head of Goldman Sachs, to guide the nation’s economy. To his nomination ceremony Paulson invited his friend and hand-selected successor to helm the investment bank, Lloyd Blankfein. And as the financial crisis unfolded, Paulson repeatedly acted as though he were still a partner at the firm that made him a $700 million man.

via Hank Paulson’s Crony Capitalism | Tim Dickinson | Rolling Stone.

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