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Friday, December 9, 2016

How Hank Paulson Gave Hedge Funds A Heads Up During The Financial Crisis

According to a Bloomberg News report, in 2008 then-Treasury Secretary Hank Paulson told a group of hedge fund managers — at least five of whom used to work for Goldman Sachs, where Paulson had served as CEO and chairman — that he was considering “placing Fannie Mae and Freddie Mac into ‘conservatorship’ — a government seizure designed to allow the firms to continue operations despite heavy losses in the mortgage markets.” This course of action would effectively wipe out the value of the firms’ stock.

At the same time, Paulson was telling the New York Times that shareholders should maintain control of the two mortgage giants.

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