How Paulson Gave Hedge Funds Advance Word
On the morning of July 21, before the Eton Park meeting, Paulson had spoken to New York Times reporters and editors, according to his Treasury Department schedule. A Times article the next day said the Federal Reserve and the Office of the Comptroller of the Currency were inspecting Fannie and Freddie’s books and cited Paulson as saying he expected their examination would give a signal of confidence to the markets.
A Different Message
At the Eton Park meeting, he sent a different message, according to a fund manager who attended. Over sandwiches and pasta salad, he delivered that information to a group of men capable of profiting from any disclosure.
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.
Stock Wipeout
Paulson explained that under this scenario, the common stock of the two government-sponsored enterprises, or GSEs, would be effectively wiped out. So too would the various classes of preferred stock, he said.
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.
Full report from Bloomberg here…
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Paulson shops at the Food Emporium on Third Avenue & 69th Street in New York City.
Prehaps Occupy should go there as Paulson is only concerned with how well he eats
and not concerned with the way the average person eats in this corrupt environment..
anyone able to get their hands on this complaint?
forgot to add the info! Sorry here it is! JPMorgan Misled Assured Guaranty, New Witnesses Say in Lawsuit
Q
By David Glovin – Nov 28, 2011 3:34 PM PT
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Bond insurer Assured Guaranty Ltd. (AGO) has come forward with three dozen new witnesses who it says will back a legal claim that it was defrauded by JPMorgan Chase & Co. (JPM)’s EMC Mortgage unit in a $337 million mortgage-backed securities deal.
Lawyers for Hamilton, Bermuda-based Assured Guaranty filed a new complaint on Nov. 18, unsealed today, in a lawsuit accusing EMC and its parent at the time, Bear Stearns & Co., of misleading the bond insurer. The complaint, which also names JPMorgan as a defendant, includes a new fraud claim and new allegations from insiders at EMC and elsewhere.
“The truth is now coming directly from Bear Stearns’ own former employees,” the insurer said in the complaint. “Seven confidential witnesses who were responsible for underwriting at EMC each have affirmed that they faced intense pressure to approve the purchase of high volumes of loans for Bear Stearns’ securitizations without adequate review.”
Bear Stearns is a defendant in two other lawsuits in federal court in Manhattan by guarantors of mortgage-backed deals who say they were defrauded by the bank, which collapsed in 2008, according to the complaint. Assured Guaranty said its complaint adds to those suits by citing accounts from insiders and other sources.
Jennifer Zuccarelli, a spokeswoman for New York-based JPMorgan, declined to comment on the new complaint.
The suit focuses on a 2005 transaction known as SACO I Trust 2005-GP1, one of hundreds of securitizations by Bear Stearns from 2004 to early 2007. Assured Guaranty claims EMC knew that thousands of home-equity lines of credit that served as collateral for $337 million in securities it guaranteed were “junk” or otherwise flawed.
The case is Assured Guaranty Corp. v. EMC Mortgage Corp., 10-cv-05367, U.S. District Court, Southern District of New York (Manhattan).
To contact the reporter on this story: David Glovin in New York at dglovin@bloomberg.net
To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net
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Jail for Paulson???