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Fix Was In:
The Stock Market was Rigged
by John Crudele
at The New York Post
New York, NY -- So, now do you believe me? The stock
market was rigged.
It has been a little lonely
telling this story over the past few years.
But now that another news
organization has finally gotten off its lazy butt, I’ll tell it again: Under
former Treasury Secretary Hank Paulson, confidential
government information was regularly leaked to select people on Wall Street.
As I’ve explained many times
before, The Post got hold of Paulson’s telephone records back in 2009. And
the phone logs show that Paulson, the former head of Goldman Sachs,
regularly spoke with influential people on Wall Street with whom he
shouldn’t have been communicating. These phone calls could have been — let’s
use the word “enriching” — for the recipients.
Among his regular phone buds
was Lloyd Blankfein, who, for example, spoke six times with
Paulson on Sept. 18, 2008. That was a day of great market turmoil and —
while there is no way of knowing what the two men spoke about — the calls
did coincide with a major turnaround in stock prices.
That was just one example.
There were many recipients
of Paulson’s calls. And the conversations went on for years and were
especially frequent when Washington needed a friend on Wall Street.
All an investigator — not to
mention a prosecutor — would have to do is check the trading records of the
firms on the receiving end of Paulson’s chats to determine if there was any
And, guaranteed, they’d find
That’s what I’ve been
writing for the past two years. And it is the biggest story that’ll ever be
broken in the history of American financial journalism — the US markets are
rigged, with the elite and connected getting a distinct unfair advantage
over the rest of us schlumps.
Enter Bloomberg Markets magazine last week with a story headlined, “How
Paulson Gave Hedge Funds Advance Word.”
It addresses the morning of July 21, 2008 — a time when both Fannie Mae and
Freddie Mac, government-sponsored organizations that buy most of the
nation’s residential mortgages, were in serious trouble.
Bloomberg says Paulson met
with reporters and editors of The New York Times that morning and told them
he expected an audit of Fannie’s and Freddie’s books to give the financial
But he told a different
story when he met that same day with hedge-fund managers at the office of
Eton Park Capital Management.
“Around the conference table were a dozen or so hedge-fund managers and
other Wall Street executives — at least five of them alumni of Goldman Sachs
Group Inc.,” according to Bloomberg Market’s January issue.
Quoting a fund manager at
that Eton Park meeting, “After a perfunctory discussion of the market
turmoil . . . the secretary [Paulson] went on to describe a possible
scenario for placing Fannie and Freddie into ‘conservatorship’ — a
government seizure designed to allow the firms to continue to operate
despite heavy losses in the mortgage markets.”
Paulson explained further
how the publicly traded stock of both companies would be wiped out under the
Bloomberg Markets said the
fund manager in attendance who gave the magazine this information “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 fund manager said he
left the meeting, called his attorney and was advised not to trade any
Fannie or Freddie stock, because Paulson had given him non-public
What else is new?
By giving confidential
information to a roomful of traders, Paulson had to understand he’d
influence the price of Fannie and Freddie stock and, by extension, the whole
He’d also be giving the
people receiving that information a chance to cheat — to rob public
investors who weren’t lucky enough to be invited to such meetings.
And that brings me to last
According to other journalists’ reports, the Federal Reserve voted on
Monday, Nov. 28, to approve a financial bailout for Europe using our
dollars. That’s the same day that the stock market staged a strong rally,
which turned out to be only a preliminary event to the 400-plus point surge
the Dow would have two days later — after the rest of us found out about the
Was it just a coincidence
that the stock market rallied nicely on the day of the Fed vote? Or was
information from that Fed’s Open Market Committee leaked by someone to
friends on Wall Street?
Only a few people know what
happened on Nov. 28.
But this much I do know:
Whatever games are being played between Washington and Wall Street must
stop, or the American capital markets will cease functioning. Nobody with
any sense will participate in a market that’s controlled by greedy people
looking out only for themselves.
The second thing I know:
Journalists need to start doing their job in rooting out corruption like
Bravo to Bloomberg Markets
magazine. It’s about time at least one publication woke up.
– FM Duck
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