Information in this post is from Taken to Task on 12/2/11: http://finance.yahoo.com/blogs/daily-ticker/taken-task-capt-cronyism-hank-paulson-124007702.html
How could Treasury secretary (Hank Paulson) providing insider information to Hedge fund managers be legal?
The story goes that in July 2008, then Treasury Secretary Hank Paulson tipped off a small group of hedge fund managers to the government’s plan to put Fannie Mae and Freddie Mac into conservatorship. When the government did just that in early September 2008, anyone hoping for a bailout of Freddie and Fannie (or just long the GSEs) got wiped out…while anyone short the stock made a boatload.
How could this not be legal? Paulson’s behavior is a dereliction of duty, violation of the public trust and for undermining the American taxpayer he swore to support.
According to the reports Paulson’s meeting and alleged comments did not violate insider trading laws; technically it was legal. Then what do the insider trading laws protect us against? According to the rules insider trading by sitting members of Congress is wrong and offensive, Paulson’s gift to his hedge fund buddies, where he was CEO prior to becoming Treasury Secretary — is so grotesque and wrong it boggles the mind; more especially considering that Paulson told the press a different story than he told the money managers.
Why are the Justice Department, the SEC or any other federal prosecutor not investigating Paulson’s actions regarding Fannie and Freddie — and why don’t they shed light on his meeting with hedge fund managers. Or will the SEC once again allow all to pay a small fine and claim no fault?
Edi Alvarez, CFP®
BS, BEd, MS