"Hank Paulson Warned Hedge Funds, Goldman Sachs Pals About Takeover of
Fannie Mae and Freddie Mac

Back in the summer of 2008, as the financial system teetered on the edge
of collapse, no one knew what would happen to the debt-laden mortgage
giants Fannie Mae and Freddie Mac—would they be allowed to go under, or
would the government come to their rescue? What would become of the
shareholders? Trillions rested on the answers to those questions. Oh
wait, someone did know. Treasury Secretary Hank Paulson. And he told his
hedge fund pals and former Goldman Sachs colleagues. He just didn't tell
you. Because, really—who the **** are you?

Bloomberg Markets has the amazing, jaw-dropping, rage-fomenting story of
how, during a casual July 2008 lunch with some hedge fund oligarchs at
the Manhattan offices of Eton Park Capital Management, Hank Paulson
explained to them precisely how the U.S. government was going to ease
Fannie Mae and Freddie Mac into conservatorship, seven weeks before it
did so:

"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.""

Poor bob. The fool and his money are soon parted.