Should Hank Paulson Be In Jail?

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In a fairer world, former Treasury Secretary Hank Paulson would spend the next 10 to 12 years in federal prison. In case you missed it, we now have proof that, at the height of the housing crisis and just a few weeks before the public learned that Freddie and Fannie were completely underwater, Paulson had lunch with his old pals at his old job — Goldman Sachs
GS
men — to whom he told everything. EVERYTHING. According to
Bloomberg Markets Magazine
,
Paulson told the group
that Freddie and Fannie were going to go into conservatorship, which meant that their stock values were going to drop like a stone. This was, for all intents and purposes, insider information. No one outside of Paulson knew for a fact what was going to happen in seven weeks, which was the time between Paulson's secret meeting with his former Goldman colleagues and the government announcement. Every person in that meeting was in a position to make massive trades — particularly shorting the housing stock — based solely off what Paulson told them at that meeting. No one knows precisely how much money was made off that information, or who, if anyone, made specific trades off of it. That's not the point. The point is that the Treasury Secretary of the United States gave insider information to his friends, and they could have made a killing off it. If he had access to that same information as CEO of Fannie instead of as Treasury Secretary, and made the same exact speech to the same exact people, he'd be sharing a cell with Raj Rajaratnam right now. But, because he is a government stooge, he gets off, scot-free. So, too, do the traders who almost certainly made a killing off Paulson's insider information. You see, when people ask what the Occupy Wall Street movement is all about, this is the kind of crap we're talking about. It isn't about wealth or people working hard to become wealthy. It's about crony capitalism. It's about government regulators and employees passing along insider information to their millionaire friends, helping them make billions of money in trades that simply were not available to you or me. It's about fairness. Is there anything fair or even remotely American about the Treasury Secretary giving away stock tips to his former employees, off insider information, and then telling a completely different story to everyone else? Is that "capitalism"? Or is that something else? I would argue, and the Occupiers obviously agree, that such behavior is wrong. I'd go a step further and wonder if these idiots who rake in this money via insider information do not also collapse systems and cause runaway markets ON PURPOSE. That is, set up the system to fail and then trade on the knowledge that it will fail. You know, sort of like what they did with Lehman Brothers. We've also seen this sort of systemic manipulation with oil prices (speculators driving the price up, keeping the economy down) with Goldman Sachs. We've seen Goldman Sachs push their clients in one direction on investments and then take the opposite investment approach with their own money. If we're not going to make Hank Paulson pay for his crimes, and we're not going to make the traders give back their ill-gotten profits, then maybe it's time for President Obama to pull out the nuclear option and just break up these hedge funds and banker cartels. Oh wait...he's one of them, too. Nevermind. Go back to your regularly scheduled, pre-approved government sanctioned news program. Some animals are more equal than others, and I guess we just have to get used to that. Or, you know, join the Occupy movement and advocate for a system where the best ideas and the hardest work pays off, instead of the best connections and the deepest pockets of lies and deceit.
Like my stories? You can subscribe for my free newsletter here.Read more of my stories at Benzinga. You can also reach me by email john@benzinga.com or on twitter @johndthorpe.
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Posted In: NewsMovers & ShakersPoliticsLegalMarketsGeneralBloomberg Markets MagazineCareer CriminalHank Paulsoninsider tradingOccupy Wall Street
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