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According to the Collins English Dictionary 10th Edition fraud can be defined as: "deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage".[1] In the broadest sense, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation. Defrauding people or entities of money or valuables is a common purpose of fraud, but there have also been fraudulent "discoveries", e.g. in science, to gain prestige rather than immediate monetary gain
*As defined in Wikipedia

Monday, November 8, 2010

H. Paulson: an "Interested" Man from Goldman Sachs

According to Wikipedia, Hank Paulson, the 74th United States Treasury Secretary, worked at Goldman Sachs beginning in 1974. He became a partner at GS in 1982. In 2005 he earned $37 million and in 2006, $16.4 million. He had a hand in the deregulation of the financial system by helping dismantle a risk management office created to oversee banks. Eventually, even the voluntary regulation of banks' capital was dismissed. In 2001 he said sub-prime mortgage problems were "contained." In 2008 he felt that the banking system was well regulated. However, he and Bernanke pressured Lehman Bros. into bankruptcy. Even though Paulson was not a proponent of government intervention, he told bankers that they would be forced to accept TARP money.

Conflicts of interest abounded in and around Mr. Paulson when he was in office. In 2008, The Huffington Post listed those conflicts in this article.

There is no doubt that Hank Paulson was an "interested" man when he became Treasury Secretary. As Janet Tavakoli explains it on Q & A from C-Span in April, 2009:

You had Hank Paulson, former CEO of Goldman Sachs, who was our Treasury Secretary mostly - before Tim Geithner, and Hank Paulson was the CEO of Goldman Sachs at the time that they were putting on these transactions with AIG that later became so problematic. And those contracts could have been negotiated so that AIG didn’t go under, but that didn’t happen.

Instead, everything that happened was very much to the financial advantage of his former employer Goldman Sachs. He was an interested man. You might recall what Thomas Paine said about interested men. He said that, ”History has shown us that we can not trust interested men.”

The transcript of Q & A can be found here

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More recently, an article found at LIVINGLIES tells us that a member of the House of Representatives has written a letter to the FCIC about Paulson's conflicts of interest:

Rep. Cliff Stearns (R-FL): Investigate Bush Treasury Sec'y Paulson For Conflict of Interest
by Neil Garfield, November 7, 2010
. . . .

Washington, Nov 3 -

Noting statements by former regulators, Rep. Cliff Stearns (R-FL) is urging the Financial Crisis Inquiry Commission (FCIC) to investigate former Treasury Secretary Henry Paulson who the regulators indicated had a clear conflict of interest and deliberately acted in the best interest of his former firm, Goldman Sachs. Said Stearns, “Mr. Paulson’s inaction and perhaps intentional failure to perform a required duty during his first 15 months as Secretary reveal his complicity in putting Wall Street before Main Street.” Stearns wrote to Phil Angelides, Chairman of the FCIC, outlining how Paulson failed to take action to address the housing bubble because it would have harmed the financial position of Goldman Sachs (a copy of this letter is attached).

In his letter, Stearns included a statement from former thrift regulator William Black who noted that “No one was better positioned…than Mr. Paulson to understand exactly what the implications of his moving against the (housing) bubble would have been for Goldman Sachs, because he knew what the Goldman Sachs positions were.” Mr. Black testified before the FCIC on September 21, 2010, adding that Paulson “knew that if he acted the way he should, that would have burst the bubble. Then Goldman Sachs would have been left with a very substantial loss, and that would have been the end of bonuses at Goldman Sachs.”

Stearns also cited a statement to Congress by Richard Newsom, former senior thrift examiner and key investigator of the Lincoln Savings and Loan collapse of the 1980s. Newsome said that it was “simply implausible that Paulson couldn’t see the relation between delaying strong action by Treasury and the benefit to letting places like Goldman” reduce their risks.
A copy of the letter can be read here

The article is found here


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