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Conflict Of Interest? Report Says Goldman Sachs ‘Among Biggest
Beneficiaries’ Of Paulson’s Bailout
Think
Progress
Tuesday, Sept 23, 2008
In making his push to administer the largest federal bailout
of Wall Street in history, Treasury Secretary Henry Paulson
is seeking unfettered authority. McClatchy poses the question
today, “can you trust a Wall Street veteran with a Wall
Street bailout?,” referring to Paulson, the former CEO
of Goldman Sachs:
But the conflicts are also visible. Paulson has surrounded
himself with former Goldman executives as he tries to navigate
the domino-like collapse of several parts of the global financial
market. And others have gone off to lead companies that could
be among those that receive a bailout.
In late July, Paulson tapped Ken Wilson, one
of Goldman’s most senior executives, to join him as an
adviser on what to about problems in the U.S. and global banking
sector. Paulson’s former assistant secretary, Robert Steel,
left in July to become head of Wachovia, the Charlotte-based
bank that has hundreds of millions of troubled mortgage loans
on its books.
(Article continues below)
Goldman Sachs cashed in under Paulson, with earnings in 2005
of $5.6 billion; Paulson made more than $38 million that year.
A 2005 annual report shows that “Goldman was still a significant
player” in issuing mortgage bonds. The conflict of interest
is increasingly clear today, as Bloomberg reports that “Goldman
Sachs Group Inc. and Morgan Stanley may be among the biggest
beneficiaries” of Paulson’s bailout plan:
Goldman Sachs Group Inc. and Morgan Stanley may be among
the biggest beneficiaries of the $700 billion U.S. plan to
buy assets from financial companies while many banks see limited
aid, according to Bank of America Corp.
“Its benefits, in its current form, will
be largely limited to investment banks and other banks that
have aggressively written down the value of their holdings and
have already recognized the attendant capital impairment,”
Jeffrey Rosenberg, Bank of America’s head of credit strategy
research, wrote in a report today, without identifying particular
investment banks.”
The conflict of interest provides all the more reason for the
bailout legislation in Congress to have more stringent oversight
that the administration opposes.
The Wonk Room notes six months ago, Paulson claimed, “our
banks and investment banks, are strong.”
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