Hank Paulson exposed by the New York Times

This is not from today, but I just ran into this report from the NYTimes and I think it's a very good job and seriously worth reading.
Here are some quotes:
Before he became President George W. Bush’s Treasury secretary in 2006, Henry M. Paulson Jr. agreed to hold himself to a higher ethical standard than his predecessors. He not only sold all his holdings in Goldman Sachs, the investment bank he had run, but also specifically said that he would avoid any substantive interaction with Goldman executives for his entire term unless he first obtained an ethics waiver from the government.

But today, seven months after Mr. Paulson left office, questions are still being asked about his part in decisions last fall to prop up the teetering financial system with tens of billions of taxpayer dollars, including aid that directly benefited his former firm. [...]

Mr. Paulson did not say when he received a waiver, but copies of two waivers he received — from the White House counsel’s office and the Treasury Department — show they were issued on the afternoon of Sept. 17, 2008.
While Mr. Paulson spoke to many Wall Street executives during that period, he was in very frequent contact with Lloyd C. Blankfein, Goldman’s chief executive, according to a copy of Mr. Paulson’s calendars acquired by The New York Times through a Freedom of Information Act request.

During the week of the A.I.G. bailout alone, Mr. Paulson and Mr. Blankfein spoke two dozen times, the calendars show, far more frequently than Mr. Paulson did with other Wall Street executives.

On Sept. 17, the day Mr. Paulson secured his waivers, he and Mr. Blankfein spoke five times. Two of the calls occurred before Mr. Paulson’s waivers were granted.
Mr. Paulson was closely involved in decisions to rescue A.I.G., according to two senior government officials who requested anonymity because the negotiations were supposed to be confidential.

And government ethics specialists say that the timing of Mr. Paulson’s waivers, and the circumstances surrounding it, are troubling.

“I think that when you have a person in a high government position who has been with one of the major financial institutions, things like this have to happen more publicly and they have to happen more in the normal course of business rather than privately, quietly and on the fly,” said Peter Bienstock, the former executive director of the New York State Commission on Government Integrity and a partner at the law firm of Cohen Hennessey Bienstock & Rabin.

He went on: “If it can happen on a phone call and can happen without public scrutiny, it destroys the standard because then anything can happen in that fashion and any waiver can happen.”
Mr. Paulson helped decide the fates of a variety of financial companies, including two longtime Goldman rivals, Bear Stearns and Lehman Brothers, before his ethics waivers were granted. Ad hoc actions taken by Mr. Paulson and officials at the Federal Reserve, like letting Lehman fail and compensating A.I.G.’s trading partners, continue to confound some market participants and members of Congress.

“I think it’s clear he had a conflict of interest,” Mr. Stearns, the congressman, said in an interview. “He was covering himself with this waiver because he knew he had a conflict of interest with his telephone calls and with his actions. Even though he had no money in Goldman, he had a vested interest in Goldman’s success, in terms of his own reputation and historical perspective.”
Adding to questions about Mr. Paulson’s role, critics say, is the fact that Goldman Sachs was among a group of banks that received substantial government assistance during the turmoil. Goldman not only received $13 billion in taxpayer money as a result of the A.I.G. bailout, but also was given permission at the height of the crisis to convert from an investment firm to a national bank, giving it easier access to federal financing in the event it came under greater financial pressure.

Goldman also won federal debt guarantees and received $10 billion under the Troubled Asset Relief Program. It benefited further when the Securities and Exchange Commission suddenly changed its rules governing stock trading, barring investors from being able to bet against Goldman’s shares by selling them short.

Now that the company’s crisis has passed, Goldman has rebounded more markedly than its rivals. It has paid back the $10 billion in government assistance, with interest, and exited the federal debt guarantee program. It recently reported second-quarter profit of $3.44 billion, putting its employees on track to earn record bonuses this year: about $700,000 each, on average.
But according to two senior government officials involved in the discussions about an A.I.G. bailout and several other people who attended those meetings and requested anonymity because of confidentiality agreements [...] Mr. Paulson played a major role in the A.I.G. rescue discussions over that weekend and that it was well known among the participants that a loan to A.I.G. would be used to pay Goldman and the insurer’s other trading partners.

On Sept. 16, 2008, the day that the government agreed to inject billions into A.I.G., Mr. Paulson personally called Robert B. Willumstad, A.I.G.’s chief executive, and dismissed him. Mr. Paulson’s involvement in the decision to rescue A.I.G. is also supported by an e-mail message sent by Scott G. Alvarez, general counsel at the Federal Reserve Board, to Robert Hoyt, a Treasury legal counsel, that same day.

The subject of the message, acquired under the Freedom of Information Act, is “AIG Letter,” and it contains a reference to a document called “AIG.Paulson.Letter.draft2.09.16.2008.doc.” The letter itself was not released.
Mr. Paulson’s schedules from 2007 and 2008 show that he spoke with Mr. Blankfein, who was his successor as Goldman’s chief, 26 times before receiving a waiver.
On the morning of Sept. 16, 2008, the day the A.I.G. rescue was announced, Mr. Paulson’s calendars show that he took a call from Mr. Blankfein at 9:40 a.m. Mr. Paulson received the ethics waiver regarding contacts with Goldman between 2:30 and 3 the next afternoon. According to his calendar, he called Mr. Blankfein five times that day. The first call was placed at 9:10 a.m.; the second at 12:15 p.m.; and there were two more calls later that day. That evening, after taking a call from President Bush, Mr. Paulson called Mr. Blankfein again.

When the Treasury secretary reached his office the next day, on Sept. 18, his first call, at 6:55 a.m., went to Mr. Blankfein. That was followed by a call from Mr. Blankfein. All told, from Sept. 16 to Sept. 21, 2008, Mr. Paulson and Mr. Blankfein spoke 24 times.

At the height of the financial crisis, Mr. Paulson spoke far more often with Mr. Blankfein than any other executive, according to entries in his calendars.
Moreover, because the schedules include only phone calls made through Mr. Paulson’s office at Treasury, they provide only a partial picture of his communications. They do not reflect calls he made on his cellphone or from his home telephone.

According to the schedules, Mr. Paulson’s contacts with Mr. Blankfein began even before the height of the crisis last fall. During August 2007, for example, when the market for asset-backed commercial paper was seizing up, Mr. Paulson spoke with Mr. Blankfein 13 times. Mr. Paulson placed 12 of those calls.

By contrast, Mr. Paulson spoke six times that August with Richard S. Fuld Jr. of Lehman, four times with Jamie Dimon of JPMorgan Chase and only twice with John Thain of Merrill Lynch.
Conclusion: Hank Paulson belongs to jail.

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