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Archive for the ‘Henry Paulson’ Category

Oh, so there was inside information passed around?

On the morning of July 21, before the Eton Park meeting, Paulson had spoken to New York Times reporters and editors, according to his Treasury Department schedule. A Times article the next day said the Federal Reserve and the Office of the Comptroller of the Currency were inspecting Fannie and Freddie’s books and cited Paulson as saying he expected their examination would give a signal of confidence to the markets.

This is the narrative we heard on CNBC and elsewhere.

There’s one problem: It was a lie.

At the Eton Park meeting, he sent a different message, according to a fund manager who attended. Over sandwiches and pasta salad, he delivered that information to a group of men capable of profiting from any disclosure.

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.

In other words all equity would be wiped out, as would preferred stock.

Did Paulson break any laws by disclosing his intentions on a preferential basis?  That’s a bit more murky.  At first blush the answer would appear to be “no”; he had no duty to file an 8K since he wasn’t an officer of Fannie or Freddie, and it would appear that Reg-FD wouldn’t apply to him either.

The better question is whether he was a public fiduciary at the time, in which case disclosing inside information in such a preferential fashion would be a breach.

There’s no way to know if the hedgies involved in the lunch traded on what they learned.  The Bloomberg story says that at least one of them called his lawyer who told him to stop trading in any such securities as that was material non-public inside information (duh!) but whether they and the rest did so is an open question.

Both Bill Black and Janet Tavakoli went on the record for Bloomberg:

“You just never ever do that as a government regulator — transmit nonpublic market information to market participants,” says Black, who’s a former general counsel at the Federal Home Loan Bank of San Francisco. “There were no legitimate reasons for those disclosures.”

Janet Tavakoli, founder of Chicago-based financial consulting firm Tavakoli Structured Finance Inc., says the meeting fits a pattern.

“What is this but crony capitalism?” she asks. “Most people have had their fill of it.”

Let’s just call this what it really is: Theft.

Remember, all after-IPO trades of a stock or after-issue trades of some other security are at someone else’s profit or expense.  That is, if you win someone else either loses directly or they lose opportunity — that is, they sell you their shares, you buy them, they don’t make the money and you do.  Likewise, if you buy something and it goes down in price, you take the loss they otherwise would have.  And if you short something you’ve borrowed the shares from somebody and the person who you short them to swallows the loss while you gain.

Therefore what we really have to ask here is whether any shareholder of the common or preferred stock has a valid fraud claim against the Government and Paulson personally.  After all, his public statements, which if this story is accurate were intentional lies, resulted in a near-doubling of Fannie’s stock over the space of four days.

Isn’t it nice when the government steals your money?

Oh, and why do we sit for this crap again?

STOP THE LOOTING & START PROSECUTING!

Today, someone sent me a link to a recent Pajama’s Media article, which I believe embodies the erroneous perception of many on the right and perpetuates the outright lie that banks are innocent victims in our current economic situation.

Almost everyone who believes in the Constitution and free markets properly considers October 3, 2008, one of the darkest days in U.S. history. It was on that day that the “Emergency Economic Stabilization Act” creating the Troubled Asset Relief Program (TARP) became law. A day later, I wrote that law’s passage, accompanied by tactics and threats which amounted to orchestrated blackmail, over the strident objections of over 150 economists from across the political spectrum, only days after its initial voter-driven failure, proved that Washington’s politicians and elites “don’t care what we think.”

Abhorrent as it was, the sickening saga of TARP’s enactment was nothing compared to what transpired less than two weeks later.

I agree that October 3, 2008 was a horrible day for this country.  It was essentially when the very last bit of capitalism that remained in this country was destroyed.  It was not, however, because of the extortion of the BANKS by Henry Paulson, it was his extortion of CONGRESS.

On October 14, Paulson, with President George W. Bush’s shameful capitalism-betraying acquiescence, morphed the program into a hostile government takeover of the banking system. If there’s one thing the ignoramuses in the Occupy Wall Street crowd and the American people in general need to understand, it’s this: Hank Paulson didn’t ask.

Instead, as the New York Times reported, Treasury’s Godfather called big bank executives into a meeting with no pre-announced agenda, made them an offer they couldn’t refuse, and created the unmistakable impression that every one else below them in the pecking order would have to fall in line:

Wait.  What?  ‘Hostile takeover of our banking system.’  First of all, there has to BE a banking system in existence before it can be taken over.  If a bunch of insolvent banks are a ‘banking system,’ that hardly qualifies as something that can be ‘taken over.’  Secondly, I’d like to know how a banker (that would be Henry Paulson, former CEO of Goldman Sachs), can in a hostile manner, take over that of which he already has control.

Beyond those two missed points, Pajama’s Media also fails to mention the REST of the story.  BEFORE Hank Paulson ever held a gun to the heads of the banks, he was wielding that gun and pointing it directly at Congress.  As evidenced here in Congressional testimony given by Brad Sherman, the threats delivered to Congress by Hank Paulson, with his co-hort in crime, Ben Bernanke were nothing less than a promise of Armageddon if the banks were not rescued.

Brad Sherman was not alone in sounding the alarm.  There were politicians from both sides of the aisle that talked to the media (however briefly) immediately following this act of treason.  Paulson and Bernane did not just issue threats, but promises of ‘tanks in the streets’ and mass rioting if Hank didn’t receive his taxpayer money-filled ‘bazooka.’  Congress may be many things, but well-versed in the finer points of the financial system, they are NOT.  It was for good reason that they panicked.  Remember, never let a good crisis go to waste.  Congress is not the only entity that puts that old adage to good use.

So, Paulson didn’t just wield that gun once, he wielded it twice, and the FIRST time that bazooka was aimed directly at Congress and he did so with the help of the ‘chief banker’ himself, Ben Bernanke.  While some banks certainly didn’t like the idea of the stigma attached to the bailouts, they liked the idea of their insolvency being exposed to the world even LESS and  moreover, the bankers were rather opposed to losing their very lucrative monopoly on the control of the quantity of money in our economic system. First and foremost, Hank Paulson and Ben Bernanke were not about to allow the control of the money supply be in any way handed back to Congress by admitting the complete failure of our monetary system.  THIS is what really happened in October of 2008.  If some of the banks balked later, it was merely for show, as not a single one of them even attempted to decline the money – because that would have been impossible for any of them to do — and still exist.

THE BANKS REMAIN INSOLVENT TO THIS DAY.  NOTHING HAS CHANGED.  CONGRESS KEEPS DOLING OUT MONEY IN THE FORM OF TAXPAYER FUNDS EXTORTED OR BLATANTLY STOLEN THROUGH QEAND HIDDEN INFLATION AND THE BANKS REMAIN INSOLVENT. HOW LONG WILL TAXPAYERS WHO ARE LOSING THEIR JOBS IN DROVES CONTINUE TO SUPPORT THE BIGGEST WELFAREE ENTITLEMENT PROGRAM IN THE HISTORY OF THIS COUNTRY?  WELFARE FOR BANKERS IS NO MORE VALID AN EXAMPLE OF CAPITALISM THAN WELFARE FOR INDIVIDUALS.

This is what much of our right-leaning media pundits have become, apologists for the banker welfare state.  And it is this banker welfare state that is EXACTLY what is destroying our economy and our country.

This should come as no surprise to those who have even remotely been paying attention.  I mean, unless you’ve been living under a rock for the past 3 years, it’d be hard to miss the massive fraud perpetrated by Goldman Sachs on a regular basis.  Who could forget such classics as, Goldman pressing for high ratings on its mortgage-backed securities (CDOs), then selling them off to clients (‘they’re triple-A, you know), while unbeknownst to the sucke….errr….client, took short positions against those very same CDOs.   Then, there’s everyone’s favorite, Hank Paulson denying (to Congress, no less) that he had any knowledge this was happening at Goldman Sachs…..when he was CEO of the firm at the time.  

Despite all this illicit behavior, the Vampire Squid still lives…..and it apparently continues its murderous rampage on clients’ portfolios.  According to The Street:

Goldman helped to catalyze the recent commodity sell-off as its researchers expected little upside when the economy hit a soft patch. Crude oil tumbled beneath $100 on that report. Then, two days ago, with few fundamental changes in the demand outlook, Goldman reversed its stance, advising clients to buy.

This flip-flopping from Wall Street’s most closely followed researcher is being perceived by some as client-fleecing since the bank is able to trade in proprietary accounts before it releases research and the markets react, as they often do to Goldman’s calls.

Heh…but it gets better…..

News broke yesterday, or rather, a blogger pulled data yesterday to show that Goldman dumped 1,260,802 shares of Apple(AAPL_) during the first quarter, even as its research division rated the stock “buy” and maintained its lofty $470 target. Little due diligence is done in the journalism community on the interplay between asset-management and research units.

To check up on the bank’s activities, we tracked its 58 Conviction Buy List stocks, which are the equities that the bank claims that it is most optimistic about to clients, to see if it sold any during the quarter. The results are intriguing. Of the 58 so-called Conviction Buy stocks that Goldman recommended to clients during the first quarter, it sold 31, or more than half, according to its 13-F filing. [We did not include Goldman mutual funds in these calculations].

Of the 31 Conviction Buys that Goldman sold, it sold more than 1 million shares of 12 of those stocks, begging the question: How does Goldman define “conviction”? To most investors, it means putting your money where your mouth is.

On the following page is a look at 12 Conviction Buys that Goldman sold in bulk.

Find out if you’ve been fleeced by going to The Street.

I guess one would have to ask the obvious at this point:  Exactly who still uses these guys for investing?  I mean, really?  How is it they have any clients left at this point?  If you’re thinking, ‘Oh, but I’m different, they only do that to the other guy,’ you really should have your head examined.

Well, well, well.   I’m not sure what the catalyst was here, because in-your-face castigation didn’t work.   

Visit msnbc.com for breaking news, world news, and news about the economy

Whatever the reason, it’s about time.  Perhaps Winston Churchill will be proved right once again.

American’s can always be relied upon to do the right thing, after all other options have been exhausted.

I was pleasantly surprised today by Eric Odom’s blog, wherein it appears that he had a lightbulb moment.

The greatest financial theft in the History of Man

I have to warn you up front, this post is not at all optimistic. In fact, while writing this I’m feeling almost completely void of hope in the current structure of government in America.

Yesterday, while taking a break from a client’s project and stepping away from the Mac for a few hours, I ended up watching “Inside Job,” a documentary about the events that led to the 2008 financial collapse.

First, let me say there is much in this documentary I find off-putting. As is the case with many documentaries like this, there are some other agendas involved and you have to understand that in order to look for the information relevant to you.

For example, I find it extremely distasteful that George Soros and others like him are given a platform within the film. I feel the producers should have disclosed the fact that Soros actually wants and enables this type of activity to occur.

That said, the Soros agenda doesn’t change the facts put forth in the documentary. Or at least, most of them.

I knew a lot about the 2008 collapse, but I had no idea the depth of the connections between Washington and the banks on Wall Street. I know, I should already know this, but it’s easy to get caught up in the little “flash” stories of the day and in many cases they take away from the larger issues at hand.

But after seeing the documentary I started doing some research of my own. I looked into most of what was said and researched it all online yesterday and this morning. It’s all there. Yes, George Soros is interviewed and portrayed as “above the theft” in the documentary, but everything else is on the mark.

Truth is, we’ve all been had. We’re right smack in the middle of the greatest scam in History and you and I are paying the price for it. What’s worse, and possible the most hurtful, is that the work our founding fathers did, along with the lives lost defending it, is being trampled on and used for the benefit of thieves.

A post such as this can’t even begin to explore how big the problem is. For example, many of the leftist protests against the “rich” for damaging our society are actually accurate. The flaw in their effort is that they’ve subscribed to the notion that all wealthy people are in on it, which is not true. Also of note is the fact the leftists have allowed themselves to be brainwashed into believing that $250,000 revenue for a couple owning a small business makes them “rich.”

But the overall idea that a group of ultra-rich “Capitalists” are controlling the economy and Washington is in on it is, for the most part, dead on accurate.

As Glenn Beck is explaining today on his show on Fox News (which ironically details exactly what is laid out in “Inside Job”), it’s all a show. What’s a show? The federal reserve, the U.S. treasury and the administration holding the check book.

Getting back to Inside Job, another of their flaws is framing the story as a “regulation vs. Non-Regulation” war. This is flawed because when you accept the premise that they’re all in on it… both the banks and financial realm on Wall Street, and the people who left it to run the financial realm in government, more or less regulation changes nothing.

As an example, the film begins by discussing several banks in Europe who, after receiving massive infusions of taxpayer dollars, began to fall as a result of poor lending decisions and irresponsible compensation to those running the game. When government officials showed up at the bank, they were met with an army of attorneys. In most cases they weren’t able to get anywhere beyond the attorneys. In the few cases where the government official was able to make headway with the attorneys, the officials were simply offered a job with the bank, at a salary they couldn’t refuse.

What’s happening on Wall Street and in Washington is far worse. Now, in our case, the people controlling the “regulatory” bodies of government are the exact same people who built the scam. The people who ran the financial system in New York during the collapse are now running the federal reserve and treasury.

Whether or not we have Bush, Clinton or Obama as President matters little. All of them allowed Wall Street to place their power brokers in positions of power within government.

Don’t believe me? Let’s scratch the surface a little…

Timothy Geithner – United States Secretary of the Treasury under Barack Obama

In March 2008, he arranged the rescue and sale of Bear Stearns.[12][21] In the same year, he played a supporting role to Henry Paulson, former CEO of Goldman Sachs, in the decision to bail out AIG just two days after deciding not to rescue Lehman Brothers from bankruptcy. Some Wall Street CEOs subsequently expressed the opinion that decisions in which Geithner participated, especially the failure to rescue Lehman, contributed to worsening the global financial crisis.[22] As a Treasury official, he helped manage multiple international crises of the 1990s[14] in Brazil, Mexico, Indonesia, South Korea, and Thailand.[15]

Geithner believes along with Henry Paulson, that the United States Department of the Treasury needs new authority to experiment with responses to the financial crisis of 2007–2011.[12] Paulson has described Geithner as “[a] very unusually talented young man…[who] understands government and understands markets.”[21]

Henry Paulson – United States Secretary of Treasury under George Bush

He joined Goldman Sachs in 1974, working in the firm’s Chicago office under James P. Gorter. He became a partner in 1982. From 1983 until 1988, Paulson led the Investment Banking group for the Midwest Region, and became managing partner of the Chicago office in 1988. From 1990 to November 1994, he was co-head of Investment Banking, then, Chief Operating Officer from December 1994 to June 1998;[9] eventually succeeding Jon Corzine as chief executive. His compensation package, according to reports, was US$37 million in 2005, and $16.4 million projected for 2006.[10] His net worth has been estimated at over $700 million.

Also of note are comments such as this one:

“Well, as you know, we’re working through a difficult period in our financial markets right now as we work off some of the past excesses. But the American people can remain confident in the soundness and the resilience of our financial system.”

That comment came via Henry Paulson before September of 2008, when the financial system began to freefall into collapse.

And let’s not forget, Henry Paulson and Ben Bernanke led the charge to reward Wall Street’s terrible financial scam with a $700 billion check from the taxpayers.

Ben Bernanke – Chairman, Federal Reserve

On February 1, 2006, President Bush appointed Bernanke to a fourteen-year term as a member of the Federal Reserve Board of Governors, and to a four-year term as Chairman.[27][28] By virtue of the chairmanship, he sits on the Financial Stability Oversight Board that oversees the Troubled Asset Relief Program. He also serves as Chairman of the Federal Open Market Committee, the System’s principal monetary policy making body.

This happened, of course, after Bernanke “served” as a leader of the “advisers” who consulted our decisions on the global economy.

In June 2005, Bernanke was named Chairman of President George W. Bush’s Council of Economic Advisers, and resigned as Fed Governor. The appointment was widely viewed as a test run to ascertain if Bernanke could be Bush’s pick to succeed Greenspan as Fed chairman the next year.[26] He held the post until January 2006.

We could go on, and on, and on and on… but the point is that the individuals who drove the car off the cliff were handed the keys to the new car. And that car contains the power to funnel billions and billions of taxpayer dollars to those who already showed their interest is simply to defraud the nation of its wealth, and to do so through the federal government.

So while we all talk about cutting spending here and there, Facebook and the President, a birth certificate issue and whatever else is on the talking points of the day, there is a large group of individuals pulling off the greatest theft in the History of man.

That’s a profound realization that I’m guessing most Americans would prefer ignore.

-Eric Odom

UPDATE: What kind of numbers are we talking about? Try $12.3 TRILLION as a start.

All I can say is welcome to the party, guys.  I certainly hope you brought the cavalry!  Time’s running out.  People who care about this country had better come together and act now to….

STOP THE LOOTING AND START PROSECUTING!

Commentary: Crony capitalism continues

By David Stockman

This is part two of a two-part series by David Stockman. Read part one.

GREENWICH, Conn. (MarketWatch) — The destructive result of the Federal Reserve’s earlier housing and consumer credit bubble became the excuse for embracing a destructive zero interest rate policy which is self-evidently fueling even more destruction.

This destruction is namely, the exploitation of middle class savers; the current severe food and energy squeeze on lower income households; the illusion in Washington that Uncle Sam can comfortably manage $14 trillion in debt because the interest carry is close enough to zero for government purposes; and the next round of bursting bubbles building up among the risk asset classes.

Moreover, the Fed soldiers on with its serial bubble-making, even though it is evident that the hallowed doctrines of modern monetary theory and the inherently dubious math of Taylor rules have failed completely.

Indeed, the evidence that the Fed no longer has any clue about the transmission pathways which connect the base money it is emitting with reckless abandon (e.g. Federal Reserve credit) to the millions of everyday pricing, hiring, investing and financing outcomes on Main Street sits right on its own balance sheet. Specifically, if the Fed actually knew how to thread the needle to the real economy with printing press money it wouldn’t have needed to manufacture $1 trillion in excess bank reserves — indolent entries on its own books for which it is now paying interest.

So in the present circumstances, ZIRP and QE2 amount to a monetary Hail Mary. There is no monetary tradition whatsoever that says the way back to U.S. economic health and sustainable growth is through herding Grandma into junk bonds and speculators into the Russell  (RUT 823.92, +1.65, +0.20%)  .

Admittedly, the junk-bond financed dividends being currently extracted by the LBO kings from their debt-freighted portfolios may enable them to hire some additional household help and perhaps spur some new jobs at posh restaurants, too. Likewise, the 10% of the population which owns 80% of the financial assets may use their stock market winnings to stimulate some additional hiring at tony shopping malls.

That chairman Bernanke himself has explained in so many words this miracle of speculative GDP levitation, however, does not make it so. The fact is, if transitory wealth effects add to current consumer spending, they can just as readily subtract on the occasion of the next “risk-off” stampede to the downside. Indeed, the proof — if any is needed — that cheap money fueled asset inflations do not bring sustainable prosperity lies in the still smoldering ruins of the U.S. housing boom.

In truth, the Fed’s current money printing spree has no analytical foundation, and amounts to seat-of-the-pants pursuit of a will-o’-wisp — the idea of a perpetual bull market. Like the Bank of Japan, the Fed has made itself hostage to the global speculative classes, and must repeatedly inject new forms of stimulus to keep the bubbles rising.

This is the only possible explanation for its preposterous decision to allow the big banks to resume dissipating their meager capital accounts by paying “normalized” dividends and by resuming large-scale stock buybacks. These are the same financial institutions that allegedly nearly brought the global economy to its knees in September 2008, according to the Fed chairman’s own words.

In what is no longer secret testimony to the FCIC (Financial Crisis Inquiry Commission), Federal Reserve Chairman Bernanke claimed that the Wall Street meltdown “was the worst financial crisis in global history” and that “out of maybe 13…..of the most important financial institutions in the United States, 12 were at risk of failure within a period of a week or two”.

That testimony was recorded just 15 months ago, but the financially seismic events it references have apparently already faded into the dustbin of history. Still, even if the dubious proposition that the banking system has fully healed were true, what did the Fed hope to accomplish besides goosing the S&P 500  (SPX 1,314.41, +0.25, +0.02%)  via speculative rotation into the bank indices?

Well, there are no other plausible explanations. Certainly the stated theory — namely, that by green lighting disgorgements of capital today the Fed’s action will facilitate bank capital raising and new lending in the future —merits a loud guffaw. The fast money has already priced in whatever dividend increases and share buybacks may occur before the next banking crisis, but the last thing these speculators expects is a new round of dilutive capital issuance by the banks. Stated differently, the bid for bank stocks unleashed by the Fed’s relief action is predicated on speculators’ pocketing any near-term “surplus” capital, not leaving it in harms way.

Moreover, even if the Fed’s action had the effect of bolstering, not depleting, bank capital the larger issue is why does our already massively bloated banking system need more capital in any event? The reflexive answer is that this will help restart the flow of credit to Main Street, but it doesn’t take much digging to see that this is a complete non-starter.

The household sector is still saddled with massive excess debt — unless you believe that the credit bubble of recent years is the sustainable norm. The fact is, prior to the Fed’s easy money induced national LBO, debt-to-income ratios at today’s levels were unthinkable. In 1975, for example, total household debt—including mortgages, credit cards, auto loans and bingo wagers—was about $730 billion or 45% of GDP

During the 1980’s, however, this long-standing household leverage ratio began a parabolic climb, and never looked back. By the bubble peak in Q4 2007, total household debt had reached $13.8 trillion and was 96% of GDP. Yet after 36 months of the Great Recession wring-out, the dial has hardly moved: household debt outstanding in Q4 2010 was still $13.4 trillion, meaning that it has shrunk by the grand sum or 3% (entirely due to defaults) and still remains at 90% of GDP or double the leverage ratio that existed prior to the debt binge of the past three decades.

So the banking system does not need more capital in order to increase credit extensions to the household sector. In fact, the two principal categories of household debt — mortgage loans and revolving credit, continue to decline as American families slowly shed unsupportable debt. The only reason total household debt appears to be stabilizing in recent quarters is that student loan volumes are soaring, but this growth is being funded entirely by the Bank of Uncle Sam now that private bank loan guarantees have been eliminated.

Indeed, the startling fact is that the approximate $1 trillion of student loans outstanding — sub-prime credits by definition — now exceed the $830 billion of total credit card debt by a wide margin. While this latest student loan bubble will end no better than the earlier credit bubbles, the larger fact remains that the household sector is only in the early stages of deleveraging. Not the least of the self-evident motivating forces here is that the leading edge of the household sector — the 78 million strong baby boom generation — appears to be figuring out that it is not 1975 anymore, and that retirement and old age are approaching at a gallop.

This obvious household deleveraging trend remains a mystery to the Fed and to the Wall Street stock peddlers who occasionally moonlight as economists. One recent air ball offered up by the latter is that the ratio of debt to disposable personal income (DPI) has dropped materially, and that this proves the household sector has been healed financially and is ready to borrow again. Specifically, the household debt-to-DPI ratio has fallen to 116% from a peak of 130% in late 2007.

Read More At MarketWatch

Leading bank analyst Chris Whalen has raised the question of whether criminal charges should be brought against former Treasury Secretary Hank Paulson.

Any discussion of whether Paulson committed unlawful actions as Treasury Secretary needs to start with Tarp.

As the New York Times wrote last year:

In retrospect, Congress felt bullied by Mr. Paulson last year. Many of them fervently believed they should not prop up the banks that had led us to this crisis — yet they were pushed by Mr. Paulson and Mr. Bernanke into passing the $700 billion TARP, which was then used to bail out those very banks.

Indeed, Congressmen Brad Sherman and Paul Kanjorski and Senator James Inhofe all say that the government warned of martial law if Tarp wasn’t passed:

That is especially interesting given that the financial crisis had actually been going on for a long time, but – instead of dealing with it – Paulson and the rest of the crew tried to cover it up and pretend it was “contained”, and that it was obvious to world leaders months earlier that it was not a liquidity crisis, but a solvency crisis (and see this).

Bait And Switch

The Tarp Inspector General has said that Paulson misrepresented the big banks’ health in the run-up to passage of TARP. This is no small matter, as the American public would have not been very excited about giving money to insolvent institutions.

And Paulson himself has said:

During the two weeks that Congress considered the [Tarp] legislation, market conditions worsened considerably. It was clear to me by the time the bill was signed on October 3rd that we needed to act quickly and forcefully, and that purchasing troubled assets—our initial focus—would take time to implement and would not be sufficient given the severity of the problem. In consultation with the Federal Reserve, I determined that the most timely, effective step to improve credit market conditions was to strengthen bank balance sheets quickly through direct purchases of equity in banks.

So Paulson knew “by the time the bill was signed” that it wouldn’t be used for its advertised purpose – disposing of toxic assets – and would instead be used to give money directly to the big banks?

Senator McCain also says that Paulson pulled a bait-and-switch:

Sen. John McCain of Arizona … says he was misled by then-Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke. McCain said the pair assured him that the $700 billion Troubled Asset Relief Program would focus on what was seen as the cause of the financial crisis, the housing meltdown.

“Obviously, that didn’t happen,” McCain said in a meeting Thursday with The Republic‘s Editorial Board, recounting his decision-making during the critical initial days of the fiscal crisis. “They decided to stabilize the Wall Street institutions, bail out (insurance giant) AIG, bail out Chrysler, bail out General Motors. . . . What they figured was that if they stabilized Wall Street – I guess it was trickle-down economics – that therefore Main Street would be fine.”

Even the New York Times called Paulson a liar in 2008:

“First [Paulson’s Department of Treasury] says it has to have $700 billion to buy back toxic mortgage-backed securities. Then, as Mr. Paulson divulged to The Times this week, it turns out that even before the bill passed the House, he told his staff to start drawing up a plan for capital injections. Fearing Congress’s reaction, he didn’t tell the Hill about his change of heart.

Now, he’s shifted gears again, and is directing Treasury to use the money to force bank acquisitions. Sneaking in the tax break isn’t exactly confidence-inspiring, either.”

What tax breaks is the Times talking about? The article explains:

A new tax break [pushed by Treasury], worth billions to the banking industry, that has only one purpose: to encourage bank mergers. As a tax expert, Robert Willens, put it: “It couldn’t be clearer if they had taken out an ad.”

Paulson insisted on a “get out of jail card” in the Tarp bill. Specifically, the bill includes the following provision:

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

Whether or not that would shield Paulson from the false statements he made before the bill was passed – e.g. why Tarp was needed, and what would happen if it didn’t pass – is a separate question.

Moreover, Tarp is just one of Paulson’s shenanigans as Treasury Secretary. And Paulson’s acts as head of Goldman Sachs are beyond the scope of this essay.