Why Was Paulson's June 2008 Meeting With Goldman's Board Purposefully Kept Secret By The Treasury?

Tyler Durden's picture

According to Andrew Ross Sorkin's new book, which is out today, the Treasury department, and Hank Paulson in particular, have some new disclosure issues to discuss next time there is a hearing on matters of the financial crisis. Sorkin points out that in June 2008, at a time when Goldman's Board of Directors was in Moscow for a meeting with Mikhail Gorbachev, then Treasury Secretary Paulson decided to invite the entire BOD to his hotel suite in a meeting that would be "off the record" as it was considered a social event. Among the events discussed were: economic forecasts, the prospects of banks blowing up (like Lehman), as well as previews of his upcoming speech. How this occurred in an uncalendarized meeting where there was material disclosure, boggles the mind.

From Sorkin (via Felix Salmon):

When Paulson learned that Goldman’s board would be in Moscow at the same time as him, he had [Treasury chief of staff] Jim Wilkinson organize a meeting with them. Nothing formal, purely social — for old times’ sake.

For fuck’s sake! Wilkinson thought. He and Treasury had had enough trouble trying to fend off all the Goldman Sachs conspiracy theories constantly being bandied about in Washington and on Wall Street. A private meeting with its board? In Moscow?

For the nearly two years that Paulson had been Treasury secretary he had not met privately with the board of any company, except for briefly dropping by a cocktail party that Larry Fink’s BlackRock was holding for its directors at the Emirates Palace Hotel in Abu Dhabi in June.

Anxious about the prospect of such a meeting, Wilkinson called to get approval from Treasury’s general counsel. Bob Hoyt, who wasn’t enamored of the “optics” of such a meeting, said that as long as it remained a “social event,” it wouldn’t run afoul of the ethics guidelines.

Still, Wilkinson had told [Goldman chief of staff John] Rogers, “Let’s keep this quiet,” as the two coordinated the details. They agreed that Goldman’s directors would join him in his hotel suite following their dinner with Gorbachev. Paulson would not record the “social event” on his official calendar…

“Come on in,” a buoyant Paulson said as he greeted everyone, shaking hands and giving bear hugs to some.

For the next hour, Paulson regaled his old friends with stories about his time in Treasury and his prognostications about the economy. They questioned him about the possibility of another bank blowing up, like Lehman, and he talked about the need for the government to have the power to wind down troubled firms, offering a preview of his upcoming speech.

A few relevant questions should be addressed: i) how was this meeting considered to be a "social event" if such critical matters as the economy, Dick Fuld's subsequent implosion, and speech drafts were being discussed behind closed doors; ii) what are the guidelines that Wilkinson, or any other Chief of Staff for that matter, use when determining what meeting is considered to be "off the record"; iii) this is merely one example of a "behind closed doors" meeting (it just so happens to have been with Goldman) - how many other times did the Treasury permit such comparable other meetings in the past, and what was discussed on them?

One wonders whether a FOIA request for this information would even garner any relevant information as all the occurrences happened off the US Treasury's record. Yet, in keeping with the administration's professed desire for increased transparency there has to be a way to achieve some disclosure of what Hank Paulson, who is already in hot water with regard to his Bank of America involvement, had been doing, especially if it was unilaterally beneficial to his former employer.