Felix Salmon: The 'conspiracy theorists' about 'Government Sachs' were right

Section:

Hank Paulson's Inside Jobs

By Felix Salmon
Reuters
Thursday, December 1, 2011

http://blogs.reuters.com/felix-salmon/2011/11/29/hank-paulsons-inside-jo...

What on earth did Hank Paulson think his job was in the summer of 2008? As far as most of us were concerned, he was secretary of the U.S. Treasury, answerable to the American people and the president. But at the same time, in secret meetings, Paulson was hanging out with his old Goldman Sachs buddies, giving them invaluable information about what he was thinking in his new job.

The first news of this behavior came in October 2009, when Andrew Ross Sorkin revealed that Paulson had met with the entire board of Goldman Sachs in a Moscow hotel suite for an hour at the end of June 2008:

http://blogs.reuters.com/felix-salmon/2009/10/20/the-secret-paulson-gold...

He told them his views of the U.S. and global economies, he previewed a market-moving speech he was about to give, and he even talked about the possibility that Lehman Brothers might blow up. Maybe it's not so surprising that Goldman Sachs turned out to be so well-positioned when Lehman did indeed do just that a few months later.

Today we learn that the Goldman meeting in Moscow was not some kind of aberration. A few weeks later, on July 28 2008, Paulson met with a who's who of the hedge-fund world in the headquarters of Eton Park Capital Management -- a fund founded by former Goldman superstar Eric Mindich:

http://www.bloomberg.com/news/2011-11-29/how-henry-paulson-gave-hedge-fu...

... Dispatch continues below ...



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"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. ...

"Paulson explained that under this scenario, the common stock of the two government-sponsored enterprises, or GSEs, would be effectively wiped out. ...

"The fund manager who described the meeting left after coffee and called his lawyer. The attorney's quick conclusion: Paulson's talk was material nonpublic information, and his client should immediately stop trading the shares of Washington-based Fannie and McLean, Virginia-based Freddie."

When we found out about the Moscow meeting, I asked how on earth Paulson thought such behavior was OK. But 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 -- the only way that we ever find out about them is when reporters like Sorkin or Bloomberg's Richard Teitelbaum manage to find a source who was in the meeting and is willing to talk about what happened.

Given that it's taken two years since the release of Sorkin's book for the Eton Park meeting to be made public, it's fair to assume that there were other meetings too -- possibly many others. 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.

Paulson, says Teitelbaum, "is now a distinguished senior fellow at the University of Chicago, where he's starting the Paulson Institute, a think tank focused on U.S.-Chinese relations." I'd take issue with the "distinguished" bit -- unless it means "distinguished by an astonishing black hole where his ethics ought to be."

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Golden Phoenix Signs Definitive Agreement
to Acquire and Reopen Santa Rosa Gold Mine in Panama

Company Press Release
Monday, September 19, 2011

SPARKS, Nevada -- Golden Phoenix Minerals Inc. (OTC Bulletin Board: GPXM) has signed a definitive agreement to acquire a 60 percent interest, with an option to buy an additional 20 percent interest, in the Santa Rosa gold mine in Panama, now owned by Silver Global S.A., a Panamanian corporation.

Santa Rosa produced more than 100,000 ounces of gold from 1996 to 1998 before being closed in part to low gold prices, which are now more than five times higher.

Golden Phoenix intends to acquire its initial 60 percent interest in Santa Rosa by acquiring 60 percent of the share capital of a recently created company under the name Golden Phoenix Panama S.A., formed to hold and operate the mine.

Tom Klein, CEO of Golden Phoenix says: "The agreement establishes a solid framework from which we can advance Mina Santa Rosa to production-ready status."

For Golden Phoenix's complete statement, please visit:

http://goldenphoenix.us/press-release/golden-phoenix-signs-definitive-ac...