More Goldman-Paulson tarnish

This weekend's New York Times report on the details of former Treasury Secretary Hank Paulson's September 2008 meeting calender, obtained through a Freedom of Information Act request, may bring the Goldman Sachs conspiracy theories back up to a boil.It seems that the former Goldman Sachs chief, then Treasury Secretary, was on the phone with current Goldman Sachs chief Lloyd Blankfein more often than might be expected, many of the calls taking place without a required "ethics waiver".

The fact that Goldman Sachs was first in line to collect some $13 billion in government money injected into failing insurer A.I.G while other Wall Street firms were left to their own devices makes the situation even more ... errr ... curious.

During the week of the A.I.G. bailout alone, Mr. Paulson and Mr. Blankfein spoke two dozen times, the calendars show, far more frequently than Mr. Paulson did with other Wall Street executives.

On Sept. 17, the day Mr. Paulson secured his waivers, he and Mr. Blankfein spoke five times. Two of the calls occurred before Mr. Paulson’s waivers were granted.

Conventional wisdom amongst Paulson defenders is that the Treasury Secretary was just a bit player in the A.I.G. bailout - that's not what some people say.

But according to two senior government officials involved in the discussions about an A.I.G. bailout and several other people who attended those meetings and requested anonymity because of confidentiality agreements, the government’s decision to rescue A.I.G was made collectively by Mr. Paulson, officials from the Federal Reserve and other financial regulators in meetings at the New York Fed over the weekend of Sept. 13-14, 2008.

These people said Mr. Paulson played a major role in the A.I.G. rescue discussions over that weekend and that it was well known among the participants that a loan to A.I.G. would be used to pay Goldman and the insurer’s other trading partners.

Over that weekend, according to a former senior government official involved in the discussions, Mr. Paulson said that he had been warned by lawyers for the Treasury Department not to contact Goldman executives directly. But he said Mr. Paulson told him he had disregarded the advice because the “crisis” required action.

Unfortunately, Paulson is now working feverishly on his memoirs and his publisher has asked him not to comment on these matters. From the standpoint of his publisher, this is quite understandable since it will likely produce more brisk book sales even if there's a lengthy delay in answering the questions that are being asked today.

On the other hand, he may have to spill the beans long before his publisher would like if he gets invited back to Congress to explain all of his phone calls.

Mr. Paulson’s schedules from 2007 and 2008 show that he spoke with Mr. Blankfein, who was his successor as Goldman’s chief, 26 times before receiving a waiver.

On the morning of Sept. 16, 2008, the day the A.I.G. rescue was announced, Mr. Paulson’s calendars show that he took a call from Mr. Blankfein at 9:40 a.m. Mr. Paulson received the ethics waiver regarding contacts with Goldman between 2:30 and 3 the next afternoon. According to his calendar, he called Mr. Blankfein five times that day. The first call was placed at 9:10 a.m.; the second at 12:15 p.m.; and there were two more calls later that day. That evening, after taking a call from President Bush, Mr. Paulson called Mr. Blankfein again.

When the Treasury secretary reached his office the next day, on Sept. 18, his first call, at 6:55 a.m., went to Mr. Blankfein. That was followed by a call from Mr. Blankfein. All told, from Sept. 16 to Sept. 21, 2008, Mr. Paulson and Mr. Blankfein spoke 24 times.

Surely there is some clause in the Treasury Department books somewhere about "exigent circumstances" that could be invoked here to make all of this go away.

It's worked wonders for the Federal Reserve whenever they've been taken to task for doing something that just about anyone would consider to be "fishy" at best, criminal at worst.

ooo

This week's cartoon from The Economist: