Is Hank Paulson a Scofflaw?

The former Treasury secretary's meeting with Goldman Sachs in Moscow may have broken the law

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As the Wire covered on Tuesday, Andrew Ross Sorkin's new book on the bailout is generating considerable buzz about the incidents of incompetence and shadiness he uncovered. One question in particular is on everyone's minds: Did former Treasury secretary Hank Paulson break the law?  Specifically, did his dealings with Goldman Sachs, his former employer, cross the line given his written pledge to avoid of all contact with the Wall Street juggernaut?

  • Goldman Meeting in Moscow Needs Examining  Mother Jones's Nick Baumann asks the question directly: "Did Henry Paulson ... break the law?" He points to an instance in which Paulson met with Goldman Sachs executives in Moscow, ostensibly for a "social gathering," but essentially "privately shared his views on matters of direct interest to his old firm" by discussing the economic outlook and his plan for "handling failed banks." The ethics waiver Paulson signed in September, Baumann notes (as have others), won't let Paulson off the hook, since this meeting was months earlier, in June.
Whether or not this meeting actually violated the law, it was untoward enough to cause Paulson's chief of staff to fret and for Paulson to keep the gathering hidden. In retrospect, it was quite a lapse in judgment for a fellow who soon would be asking the American taxpayers for a $700 billion blank check—part of which would go to help the mega-investment bank he once ran.
  •  Can't Give Paulson Benefit of the Doubt Any More  The New Republic's Noam Scheiber has defended Paulson in the past, but writes, regarding the Moscow meeting, "I really have no idea what he was thinking." The story "makes him look erratic to the point of being reckless," Scheiber explains, "which has been part of the knock on him all along."
  • Moscow Isn't Even the Worst of It, writes renowned business blogger Felix Salmon, who just yesterday posted his own outraged reaction to the Moscow anecdote. He takes a look at a section of the book recounting Paulson's demand that Lehman Brothers "open up its books to Goldman Sachs," which "was effectively advising Treasury." Salmon thinks "[i]n many ways, this is worse than Paulson's meeting with Goldman's board" in Moscow: "Paulson is forcing Lehman to open its books fully to a direct competitor, for no obvious reason ... If the Moscow meeting wasn't enough to precipitate some kind of Congressional investigation of Paulson, this should be."
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