Back on July 21st of 2008, Treasury Secretary Henry Paulson met with some other Goldman Sachs alumni who ran investment firms. Fannie Mae was trading at $14.13 a share and Freddie Mac shares were fetching $8.75. Paulson had told the press that the Federal Reserve and the Office of the Comptroller of the Currency were inspecting Fannie and Freddie’s books and that he believed the exam would calm the markets.
But over lunch with his Goldman friends, Paulson speculated about what putting Fannie and Freddie into conservatorship would look like. Bloomberg Businesweek describes the conversation:
Paulson explained that under this scenario, the common stock of the two government-sponsored enterprises, or GSEs, would be effectively wiped out. So too would the various classes of preferred stock, he said.
The fund manager says he was shocked that Paulson would furnish such specific information — to his mind, leaving little doubt that the Treasury Department would carry out the plan. The managers attending the meeting were thus given a choice opportunity to trade on that information.
The government took over the GSEs on Saturday, September 6th. By the following Monday, Fannie and Freddie shares were trading under a dollar.
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This is no surprise at all.
This is the reason people work for the government.
Whenever people are beating their heads trying to figure out why government does this or that, why didn’t do this or that other thing … and who observe that government actions often appear to make no sense …
It starts to make perfect sense once you realize that all governments are a criminal enterprise. The stuff about “we the people”, “we’re here to protect you”, “we have to protect the children” … that’s just the (weak) cover story that they came up with.
Most people believe the tissue of lies because they want to believe it, because they don’t want to be a rebel or an outcast by denouncing the government as a gang of criminals and setting themselves at odds against their teachers, co-workers, friends and family.
But it’s time to grow up and face facts. Is there any logical reason for Fannie and Freddy and the Federal Reserve to exist, except as a means of ripping off the public on a vast scale? There is nothing – absolutely nothing – in their organization or behavior to suggest that these institutions exist for the benefit of the average person and not for the private benefit of the people who control them.
Someone call and tell Martha Stewart’s attorney that it was unfortunate that she wasn’t a member of the political class.
She produces goods and services so she is merely and only a member of the parasitized class.
Paulson is not only a member of the political class he is also a member of the inner circle of the unConstitutional coup! The only justice that reaches that spot is the fragrance of injustice caused by its economic terrorism.
.From the Bloomburg article:
“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.”
Forget charging Paulson with some violation of insider-trading regulations. By lying to the NYT, he committed securities fraud very much in the manner of Kenneth Lay and Jeff Skilling when they touted shares of Enron and gave investors false assurances of the company’s prospects. Investors who bought shares in Fannie or Freddie after that article who lost money on their purchases, and there are undoubtedly many who lost plenty, should be filing suits against Paulson, the Federal Reserve and the federal government for damages, and the SEC with the Justice Department should be preparing charges against Paulson to send him to join Mr. Skilling in prison where he is doing a 24-year sentence (Ken Lay died before he could be sent up the river).
I’m curious on how Fannie traded on the days between this meeting day and before annoucement of the takeover.
On a quick look I can’t find stock quotes back to ’08 since they changed the ticker symbol.
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