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Bloomberg is reporting this morning that Henry Paulson, Bush's Treasury Secretary, gave advance notice of bailout plans for Fannie Mae and Freddie Mac to a group of powerful hedge fund operators.

One fund manager at the meeting was so shocked that he went to his lawyer afterwards. His lawyer advised him to stop all trading immediately on Fannie/Freddie shares.

Here are some relevant paragraphs from the article:

Around the conference room 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. (GS), of which Paulson was chief executive officer and chairman from 1999 to 2006. In addition to Eton Park founder Eric Mindich, they included such boldface names as Lone Pine Capital LLC founder Stephen Mandel, Dinakar Singh of TPG-Axon Capital Management LP and Daniel Och of Och-Ziff Capital Management Group LLC.


After a perfunctory discussion of the market turmoil, the fund manager says, the discussion turned to Fannie Mae and Freddie Mac. Paulson said he had erred by not punishing Bear Stearns shareholders more severely. The secretary, then 62, went on to describe a possible scenario for placing Fannie and Freddie into “conservatorship” -- a government seizure designed to allow the firms to continue operations despite heavy losses in the mortgage markets


The fund manager says he 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 managers attending the meeting were thus given a choice opportunity to trade on that information.

Note how this info was given to Paulson's friends and Goldman alumni -- not to fund managers at Fidelity and Vanguard, who manage the 401(k) plans of working people. Wonder why that was.

We all know that Lloyd Blankfein, the CEO of Goldman Sachs was in the room when Henry Paulson made decisions about the government bailout of AIG. Yes -- it is suspicious that Goldman was the biggest benefactor of the bailout. We never really thought that Blankfein was there to give neutral advice, did we?

But two incidents reported like this now make it seem like a pattern.

How far were the bailouts rigged to benefit cronies of Paulson?

How far were the rigged to pilfer from the invested savings of working people?

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