Hank Paulson's Speed Dial #1: Goldman Sachs
It would appear that employees of the NY Post can do more than merely plant stories and spread unfounded rumors. Some of them actually do investigative work. Case in point - John Crudele, who has compiled FOIA reports to create a chronological narrative of Hank Paulson's speed-dialing in the days after the Lehman collapse, in a piece titled "The secret to Goldman Sachs' good fortune." The net result: more communication between Paulson and Blankfein during the heart of the crisis than anyone else (including then-President Bush), with the only exception of Ben Bernanke. Just what were these two people talking about so frequently in the two days when the Dow made an 800 point round trip? And just who was leaking the rumors that ultimately were based on information sourced by Hank Paulson himself? Crudele's chronology presents a relevant framework for analyzing just who the critical decision-makers are in US financial markets. Hopefully one day phone transcripts will be released and the full picture of just what information Blankfein was getting straight from his former boss can be reconstructed.
Crudele's post, represented almost in its entirety, due to the extended amount of relevant detail:
On Wednesday, Sept. 17, 2008 -- the day
before the one I am writing about -- the stock market performed
By the end of the session the Dow Jones industrial
average tumbled 449 points as investors worried about the nation's
financial system. The next morning, Sept. 18, Paulson placed his first
call of the day at 6:55 a.m., to Lloyd Blankfein,
who succeeded Paulson as CEO of Goldman. It's unclear whether the two
connected because Blankfein called Paulson minutes later.
And then Blankfein placed another call to Paulson at 7:05 a.m. for what looks like a 10-minute conversation.
After that Paulson called Christopher Cox, Securities & Exchange Commission Chairman twice; British Chancellor Alistair Darling and New York Federal Reserve head (and now Treasury Secretary) Tim Geithner two times.
Then Paulson took another call from Goldman's Blankfein.
It wasn't even 9 a.m. yet -- 30 minutes before the stock market was to
open -- and Paulson and Blankfein had already exchanged three phone
This wasn't particularly unusual.
Wednesday, Sept. 17, the day the stock market was in trouble, Paulson
spoke with Blankfein five times, including a pair of calls at 7:20 p.m.
and 8:45 p.m. One of the earlier calls -- at 12:15 p.m. -- is listed on
Paulson's log in the same five minute interval as a call to Geithner,
which could indicate that this was a conference call.
Paulson did set up a conference call, it would have been an extreme
instance of putting someone who wielded a lot of power -- Geithner --
together with someone -- Blankfein -- who could profit from that
And all of this doesn't include possible cell
phone calls. The Treasury turned over to me Paulson's official schedule
and phone records after I made a request under the Freedom of
There's no way for me, or anyone else, to
know what Blankfein and Paulson talked about during those first three
calls on Sept. 18.
But it would be reasonable to assume that
the conversation, coming as it did in a period of market turmoil, had
something to do with what was happening on Wall Street.
matter how you slice, dice or excuse it, Blankfein by 9 a.m. would have
had information that was not available to anyone else who makes their
money trading securities. And, as you can imagine, there is a whole lot
of value in that kind of inside access.
Robert Scully, a co-president of Morgan Stanley, called Paulson at 8:50 a.m. on the 18th.
But he appears to be the only Wall Street-type who was in contact with Paulson until Larry Fink, head of the private investment firm Blackrock, called at 12:40 p.m.
By then the stock market was going down again. But the decline wouldn't last long.
Stocks began a miraculous recovery at 1 p.m. on Sept. 18, when rumors
started to spread that Paulson was considering a "government entity to
bail out troubled banks" and that a meeting was going to be held that
night on the matter.
At 1:05 p.m. Blankfein called Paulson
again. Paulson would call Blankfein for the last time that day at 4:30
p.m. when he "left word."
That was the sixth time these two men called each other on Sept. 18.
That's one time less than Paulson spoke with Federal Reserve Chairman Ben Bernanke,
arguably the most important person when the financial markets are in
trouble. But Bernanke didn't get his first call from Paulson until 9:30
a.m. -- and it included Cox and Geithner.
President Bush only spoke with Paulson twice that day. To be fair, on the afternoon of Sept. 18 Paulson did call John Mack, head of Morgan Stanley (at 1 p.m.) and Merrill Lynch's John Thain(at 1:10 p.m.).
But Fink is the only one who seems to have gotten through to Paulson anywhere near the time the market started rallying.
By the end of the day, the Dow was up 410 points in an astonishing comeback.
Hopefully Tim Geithner is aware of the 1-800 arrangement that his predecessor set up with Goldman Sachs. After all why spend taxpayer money on phone bills when that same money can go straight into the balance sheet of the only company worth calling, for advice on how taxpayers should bail said company out. If this sounds too circular, don't worry, it is.