Paulson allegedly gave insider info to hedge fund managers

[a-new-machine.livejournal.com]

So, Bloomberg is reporting that Henry Paulson tipped hedge fund manages off to the Fannie Mae rescue early, allowing them to trade on the information before it was made publicly available. This info was not only secret, it was precisely the opposite of what he was telling the rest of the market - which was just then rallying on the basis of Paulson's assurances that shareholders in Fannie Mae would come out OK. This is despite the fact that Paulson was discussing a plan to put the company into a conservatorship. This conservatorship occurred less than two months later. Apparently Paulson broke no laws in his discussion, but I wonder about the hedge funds - most declined comment for the story, with only a few stating directly that they did not trade on the insider information. So, could this be it: the first prosecutable case from the financial meltdown? We definitely need more evidence, but this is worth watching.

The real question is: why tell the hedge fund managers? Can anyone think of a policy rationale that this would serve? It seemed to be an informational meeting, not a hypothetical/policy-advice meeting. The "why" of Paulson's words is more important than the "what," at least in my opinion.

Comments

[meus-ovatio.livejournal.com]

Hedge-funds are the real economy the Treasury is working to protect. The "public" economy can go to hell for all they care.