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Taken To Task: Capt. Cronyism, Hank Paulson

Aaron Task
Editor in Chief
Daily Ticker

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Earlier this week, a Federal Judge denied Citigroup's $285 million settlement with the SEC, saying the deal was "neither reasonable, nor fair, nor adequate, nor in the public interest."

Which brings us to another edition of Taken to Task.

Judge Jed Rakoff deserves major accolades for pushing back against the SEC's standard practice of letting Wall Street firms settle charges without admitting or denying wrongdoing. The Judge said the public has a right to know about any case that "touches on the transparency of financial markets whose gyrations have so depressed our economy and debilitated our lives."

The Judge's decision counts as progress in the battle against the 'Too Big to Fail' banks and their enablers in Washington. But what's really depressing and debilitating is realizing how Rakoff's ruling is but a small victory in a very minor skirmish in the broader war against crony capitalism, which seems to be running amok in America.

Consider the other news this week: In July 2008, then Treasury Secretary Hank Paulson tipped off a small group of hedge fund managers to the government's plan to put Fannie Mae and Freddie Mac into conservatorship. When the government did just that in early September 2008, anyone hoping for a bailout of Freddie and Fannie (or just long the GSEs) got wiped out...while anyone short the stock made a boatload.

How do you think the money managers tipped off by Paulson were positioned?

I'd like to take Paulson to task in the strongest possible way for dereliction of duty, violating the public trust and for generally screwing over the American taxpayer.

As reported by Bloomberg, Paulson's meeting and alleged comments did not violate insider trading laws; technically it was legal. But just as insider trading by sitting members of Congress is wrong and offensive, Paulson's gift to his hedge fund buddies - including several alum of Goldman Sachs, where he was CEO prior to becoming Treasury Secretary -- is so grotesque and wrong it boggles the mind; more especially considering what Paulson told the press about Fannie and Freddie that same week was in stark contrast to what he told the money managers.

Have you no sense of decency, at long last, Mr. Paulson?

If Hank Paulson - reportedly a religious man - has any conscience, he would refund the roughly $200 million in tax breaks he got when he sold Goldman shares upon taking the job of Treasury Secretary in 2006.

If Paulson has even a shred of shame, he would immediately turn himself in to the authorities and plead guilty to treason.

Of course, we know that's not going to happen... so I'd like to challenge the Justice Department, the SEC or any other federal prosecutor to investigate Paulson's actions regarding Fannie and Freddie -- and to see whether this nudge-nudge wink-wink meeting with hedge fund managers was an isolated incident.

I'm willing to bet it wasn't.

In addition to Paulson, I have a message for our so-called regulators -- particularly the SEC -- who, by so badly falling down on the job, have aided and abetted the systematic plundering of America: You've also been Taken to Task.

See also:

Taken to Task: A Poverty of News, an Embarrassment of Media

Taken to Task: Occupy Wall Street's Nattering Nabobs of Negativity

Taken to Task: The Cult of Warren Buffett

Taken to Task: Jamie Dimon's House of Ill Repute

Taken to Task: 'Free Market' Champions Go Begging for Bailouts (Reprise)

Taken to Task: President Obama Needs to Back Elizabeth Warren

Aaron Task is the host of The Daily Ticker. You can follow him on Twitter at @aarontask or email him at altask@yahoo.com