Data Management

12:02 PM
Phil Albinus
Phil Albinus
Commentary
Connect Directly
Twitter
RSS
E-Mail
50%
50%

Did Paulson Tip Off Hedge Fund Pals?

When a few Italian-Americans in tracksuits get together it's not necessarily nefarious but get a few Goldman Sachs bigwigs wearing pinstripes in a conference room and it can be rather suspicious.

In a sneak preview of their January cover story, Bloomberg Markets is reporting that former Treasury Head Hank Paulson may have tipped off hedge fund managers that the government was very concerned about Fannie and Freddie Mac in the summer of 2008.

This was months after the Bear Stearns collapse in March 2008 and weeks before Lehman Brothers would implode in September.

According to Bloomberg, the people in the room with Paulson were former Goldman Sachs officers who had left to start their own hedge funds. Paulson was head of Goldmans from before joining the Bush Administration.

Some key graffs:

Around the conference room table were a dozen or so hedge- fund managers and other Wall Street executives -- at least five of them alumni of Goldman Sachs Group Inc. (GS), of which Paulson was chief executive officer and chairman from 1999 to 2006. In addition to Eton Park founder Eric Mindich, they included such boldface names as Lone Pine Capital LLC founder Stephen Mandel, Dinakar Singh of TPG-Axon Capital Management LP and Daniel Och of Och-Ziff Capital Management Group LLC.

After a perfunctory discussion of the market turmoil, the fund manager says, the discussion turned to Fannie Mae and Freddie Mac. Paulson said he had erred by not punishing Bear Stearns shareholders more severely. 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.

While Bloomberg reports that there is no evidence that the hedge finds made trades based on the information, one commentator had sharp words for the former Treasury head.

In the article, Janet Tavakoli, founder of Chicago consulting firm Tavakoli Structured Finance, was blunt: "What is this but crony capitalism?" she asks. "Most people have had their fill of it."

Phil Albinus is the former editor-in-chief of Advanced Trading. He has nearly two decades of journalism experience and has been covering financial technology and regulation for nine years. Before joining Advanced Trading, he served as editor of Waters, a monthly trade journal ... View Full Bio
Comment  | 
Print  | 
More Insights
More Commentary
5 Tips On How To Prepare For A Data Breach
If you are a financial institution your cyber security defenses will be breached -- again and again. Here are five tips to respond quickly and minimize damage.
Wall Street CIOs Have a Vendor Management Problem
If Wall Street CIOs want to stay ahead of competition and ensure high-speed trading software doesn't start the next flash crash, they need better insight into vendor delivered software.
Technology Innovation Returns to Financial Services
Capital Markets Outlook 2015: Following a few years dominated by regulatory compliance and cost saving technology initiatives, financial organizations are finally investing in innovative technology and tools.
Voice Biometrics Improve Transaction Monitoring Fraud Detection
Why voice biometrics should be a part of your fraud prevention strategy in the call center.
Fintech Fast Forward 2015
What will shape the future of Fintech in 2015 and beyond?
Register for Wall Street & Technology Newsletters
White Papers
Current Issue
Wall Street & Technology - Elite 8, October 2014
The in-depth profiles of this year's Elite 8 honorees focus on leadership, talent recruitment, big data, analytics, mobile, and more.
Video
5 Things to Look For Before Accepting Terms & Conditions
5 Things to Look For Before Accepting Terms & Conditions
Is your corporate data at risk? Before uploading sensitive information to cloud services be sure to review these terms.