Paulson faces ethics spat over Goldman
FORMER US Treasury secretary Hank Paulson was in constant contact with former employer Goldman Sachs during the depths of the banking crisis, according to telephone records obtained under freedom of information law.
Paulson, who spent 32 years at Goldman, spoke with his successor as chief executive Lloyds Blankfein on two dozen occasions last September, in the week that Lehman Brothers collapsed and mammoth insurer American International Group (AIG) was bailed out.
The revelation has sparked allegations of favouritism, given that Paulson’s one-time employer, as one of AIG’s key counterparties, benefited from the firm’s bailout to the tune of some $13bn (£7.8bn).
But a spokeswoman for Paulson denied that Paulson had helped Goldman more than its rivals.
“Suggesting that AIG was saved for the sake of one firm is as ridiculous as saying firemen put out a fire in a skyscraper to protect just one of the thousands of people in the building,” she said.
Paulson asked Treasury and White House lawyers to waive a ban on contacting his former firm amid Wall Street’s darkest days. He was granted the exemption on 17 September, the day after a phone call from Blankfein and the day before AIG’s bailout.
“Following Lehman’s failure and the acquisition of Merrill Lynch that prevented its failure, officials feared the same crisis of confidence might spread to the remaining investment banks, Morgan Stanley and Goldman Sachs,” his spokeswoman said.
“If Morgan Stanley were to fail, secretary Paulson and the other regulators believed that Goldman Sachs, as the last remaining investment bank, might fail as well,” she added.
According to the telephone records, Paulson spoke twice as often with Blankfein as he did with Morgan Stanley chief executive John Mack between 16 and 21 September.