|December 13, 2011|
John Bedford Lloyd playing the character Bill Clark (based on Henry Paulson), Wall Street: Money Never Sleeps, 20th Century Fox, 2010
Treasury Secretary Henry Paulson stepped off the elevator into the Third Avenue offices of hedge fund Eton Park Capital Management LP in Manhattan. It was July 21, 2008, and market fears were mounting. Four months earlier, Bear Stearns Cos. had sold itself for just $10 a share to JPMorgan Chase & Co. (JPM).
Now, amid tumbling home prices and near-record foreclosures, attention was focused on a new source of contagion: Fannie Mae (FNMA) and Freddie Mac, which together had more than $5 trillion in mortgage-backed securities and other debt outstanding, Bloomberg Markets reports in its January issue.
Paulson had been pushing a plan in Congress to open lines of credit to the two struggling firms and to grant authority for the Treasury Department to buy equity in them. Yet he had told reporters on July 13 that the firms must remain shareholder owned and had testified at a Senate hearing two days later that giving the government new power to intervene made actual intervention improbable.
“If you have a bazooka, and people know you have it, you’re not likely to take it out,” he said.
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.
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.
At the time Paulson privately addressed the fund managers at Eton Park, he had given the market some positive signals — and the GSEs’ shares were rallying, with Fannie Mae’s nearly doubling in four days.
William Black, associate professor of economics and law at the University of Missouri-Kansas City, can’t understand why Paulson felt impelled to share the Treasury Department’s plan with the fund managers.
“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.”
Not long ago, my husband was working on a plaster sculpture, and when he removed his rubber gloves, he saw that his gold ring had disappeared. I came to pick my husband up at his studio and discovered him pale, bleary-eyed, babbling. I found the ring, camouflaged on a patch of beige carpet, and my husband cried with relief.
Teleology Rises from the Grave
Stephen T. Asma
It turns out that there are a few different teleology traditions, but the Anglo-American conversation has been blithely unaware of all but the simplest. The simple and loud version is the “natural theology” tradition, which claims that adaptation in nature must be the result of a supreme Designer because chance alone cannot account for gills in water, lungs on land, complex eyes and cell flagella.
The Death of Romance in the Shadow of the Colossus
These are the two modalities through which you engage the world of Shadow of the Colossus: In the journey, you are the lost soul; in the encounter, you become the lover and the warrior, carried by your passions into mortal struggles with the Colossi. These guardian monsters, your adversaries, fill in the emotional frame established by your travels through the Forbidden Land.
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