Bloomberg has a scathing article by Mark Pittman about the terms under which Hank Paulson invested taxpayer money in banks under TARP. I have a hard time seeing how this doesn’t amount to criminal misconduct, how this doesn’t make Paulson a bigger crook than Bernie Madoff:
Henry Paulson may be the most powerful manager of money in the world and he still couldn’t do for taxpayers with the $700 billion bailout of American banks what Warren Buffett did for his shareholders in investing in Goldman Sachs Group Inc.
The Treasury secretary has made 174 purchases of banks’ preferred shares that include certificates to buy stock at a later date. He invested $10 billion in Goldman Sachs in October, twice as much as Buffett did the month before, yet gained warrants worth one-fourth as much as the billionaire, according to data compiled by Bloomberg. The Goldman Sachs terms were repeated in most of the other bank bailouts.
The transactions are “just egregious,” said (Simon Johnson, former chief economist for the International Monetary Fund and a fellow at the Peterson Institute for International Economics in Washington). “You want to do it the way Warren does it.”
“If Paulson was still an employee of Goldman Sachs and he’d done this deal, he would have been fired,” (said Joseph Stiglitz, a Columbia University professor who won the Nobel Prize for Economics in 2001).
Buffett received 43.5 million Goldman Sachs warrants valued at $82.18 apiece on the date of the transaction, or $3.6 billion, Bloomberg analytics show. Paulson, who served as the New York-based bank’s chief executive officer until 2006, injected twice as much taxpayer money into Goldman Sachs a month later and got 12.2 million warrants worth $72.33 each, or $882 million.