Should new Treasury Secretary Henry Paulson be forced to sell his $700 million stake in Goldman Sach

[ElsewheresDaughter]

Treasury Secretary Paulson, who has been pushing this speed bailout without any stipulations or investigation turns out to be actually benefiting if this Bailout happens.


He owns $700 Million of Goldman Sach Stock and that is just what we know about (there could be millions more undeclared). Ah... this is a major conflict of interest! Now it's not only a blank check, but one made out to himself... with full executive control AND a freedom from prosecution clause in the Bill now being forced through.



Make that call to Congress! MAKE THAT CALL NOW!!!!!



Should new Treasury Secretary Henry Paulson be forced to sell his $700 million stake in Goldman Sachs?

The Goldman Rule, By Daniel Gross


George Bush with Henry Paulson

Henry Paulson, who was recently nominated to be the next treasury secretary, is facing a lot of tough choices.

Should the former CEO of Goldman Sachs continue to promote environmental causes in an administration that loathes them? What should he say about the dollar? Should he buy a condo in Washington, or a mansion? Then there's the trickiest question of all: What should he do with the mountain of money he's earned at Goldman Sachs over the years?

Not since Nelson Rockefeller served as vice president during the Ford administration has a senior government official arrived in Washington with such a high net worth. Paulson owns some 4.58 million shares in Goldman Sachs (including restricted stock) worth about $700 million at today's price and surely has millions more in other instruments.


Conflict-of-interest laws say senior government officials can't hold on to investments that could benefit from decisions they might make. Meeting this requirement is comparatively easy for an upper-middle-class secretary of agriculture. Sell your stock in Archer Daniels Midland and direct your financial adviser to avoid it and similar stocks. But for a plutocrat who is about to become secretary of treasury, it's a much more difficult call. He can't choose the default mode that worked so well for former Federal Reserve Chairman Alan Greenspan, who put his cash into government bonds. Treasury secretaries are forbidden from buying government debt after all, they issue that debt. (The T-bill strategy worked out remarkably well for Greenspan, who saw his net worth rise every time he slashed rates.) And putting the money in the simplest form of investment a dollar-denominated savings account would be both a poor investment for Paulson and a potential conflict of interest. After all, treasury secretaries frequently discuss currency exchange rates.

http://www.slate.com/id/2143018/

[Booster]

1. He should be forced to resign - period.

[TexasObserver]

3. Agreed. I can't believe anyone is taking this buffoon seriously.

[dchill]

39. Bingo. Why are no legislators...

calling for that? Or for selling his conflicting interests?

[JPZenger]

47. This is no longer true - Paulson divested - see no. 44 below

The news reports I read say that Paulsen was required to sell his ownership of individual shares when he became Treasury Secretary. That is confirmed by the information by another person in comment 44 below.

There are good reasons to want to limit the bailout, but this is not one of them.

[MichiganVote]

2. I don't trust any of these smooth talkers. They'll all sell us out, take the money and run.

[gristy]

4. you've got to be effing kidding me

Henry Paulson owns $700 million of stock in Goldman Sachs? :wtf:

I've called my Congresswoman each morning the past two days, and intend to continue to call each morning until this damn finance legislation is "tabled, for the foreseeable future". I suspect this ownership stake in Goldman Sachs is going to come up in my call tomorrow morning.

[Nikki Stone1]

5. That was my reaction too.

He should not only resign but move to Haiti and await the next hurricane season.

[antigop]

6. geez, if he's worth that much you'd think he could get his teeth fixed. n/t

[NoodleyAppendage]

7. KICK. n/t

J

[paparush]

8. Caption-

Paulson - "And we must act NOW. There is no time to think. No time to discuss. No time to debate. Americans will suffer MORE if I'm we fail to act, and act quickly. Time is of the essence and the stakes could not be higher."

Bush - "I think I went to Yale with that chick in the second row..."

[MikeNearMcChord]

9. No, let the bailout die, and watch his holdings tank.

[Barack_America]

10. Why the hell didn't this happen before he was confirmed?

That's what I would like to know.

And yes, of course he should be forced to choose between his position and his investments.

[tomp]

42. because congress is a rubber stamp? nt

[JBoy]

11. He should have to buy the first $700M of the $700B he wants taxpayers to buy.

Now taxpayers only need to cough up $699.3B.

[avaistheone1]

22. Yup. He wants the first billion in his own pocket.

What a despicable man.

[antigop]

12. Henry Paulson's Public Financial Disclosure Report for Calendar year 2006

From opensecrets.org

http://pfds.opensecrets.org/N99999962_2006.pdf

[ElsewheresDaughter]

35. thank you

[Window]

13. What a joke this man is. Do they really think people are that stupid???

[Rosa Luxemburg]

19. many people are uninformed. They only know what the media tell them!

[wmbrew0206]

14. I bet right now, he wishes he had had to sell his shares.

GS has worth a lot more when he came on board then it is now.

As to the topic, no I don't think a SecTreasury (republican or democrat) should have to liquidate his portfolio before taking the job, but he should have to have it put in a blind trust.

If future SecTreasury are forced to sell off everything thing they own, it will be harder to get the best person for the job. Depending on the current market conditions, liquidating ones portfolio on short notice could end up costing someone qualified for the position several million dollars.

Second, what do you expect them to do with the money when they sell the stocks? They are not going to just go down and put it all in a savings account, since only $100,000 is federally insured.

Also, Paulson was the CEO of GS. The firm who's employees have given more money to Obama than McCain. While you might disagree with his proposal and politics, calling someone who was selected to run probably the best Wall Street Investment firm stupid, just makes you look ridiculous. Also, GS was the first to realize the problem with MBS and got out of them way ahead of the market.

I don't like the idea of the bail out, but the alternative is worse. If the bail out does go, then the economy is really going to tank hard, and it is going to years to recover from it. The republicans will blame the democrats and blame the bad economy on President Obama. Obama won't be able to do half of what he wants if the economy is in the tank he has to spend all his political capital just getting it back on track.

[abumbyanyothername]

18. I disagree

With this statement.

<<then the economy is really going to tank hard, and it is going to years to recover from it.>>

All the American economy needs is a massive debt default at every level of the game. No more Federal Reserve for one thing.

[wmbrew0206]

20. If this bail out doesn't go through, no will a credit score below 700

is going to be able to get a loan for anything.

That will kill the economy.

[avaistheone1]

28. I strongly disagree. Why not create a government run bank with sound regulations with the

700 billion dollars?

It would keep credit moving for credit worthy individuals that troubled financial institutions will not lend to for homes, autos, school loans and businesses?

The big threat Paulsen says is that credit is not moving.

[wmbrew0206]

30. What makes you think a government run bank

would loan to people that troubled financial institution won't lend to? Since it would be government run, there will be so many regulation on what you need to be able to get a loan it wouldn't be much better than the public banks.

It would also take way too long to set up. The thing you saw today with Dodd, Paulson, and Bernakie all saying that this has to happen quickly was to keep the market from tanking and taking out more lending institutions which would make what little credit is still moving to stop.

[avaistheone1]

31. I think it would work because the banks today are not lending to credit worthy individuals - so

having a government entity step in and do so would eliminate the seizing up of the credit market. The government can re-institute more traditional lending standards that have been the bedrock of finance and have worked well for many decades in a matter of days.

I don't buy Paulsen and Bernanke's mushroom cloud. If you watched today's hearings Paulsen said he and Bernanke have been talking about this for 12 months. Now they are holding a gun to the American taxpayer at the 11th hour. They have a half-backed plan with few details, and not much intelligence to it.

Also when asked whether American's could have a stake in these companies. Paulsen balked. So they would rather see these corporations fail than give us an equity share in exchange for our dollars.
So I don't think they really need our help at all.

I don't buy any of it.

[wmbrew0206]

33. I see your point but still disagree

The goverment bank would be able to lend to at more traditional lending standards, it would take way to long to step up, at least 9 months to a year, best case scenario.

In the mean time, what are you going to about the credit freeze? Nothing would move for 9 months to a year and no one would be lending. The market would tank and the economy would go into a freeze while the US government bank was sorted out in Congress.

While this might be unpopular here at DU, I like the combination of a Wall St CEO and a University Professor combination as the two big positions in the US economy. I think there are things they threw into this proposal knowing it would pass, but would give them something to "give in on."

The idea of giving the government a sizable stake in your company is so alien that most Bod, CEO, and stockholders would rather take their chances without the bail out, than let the government into the board room and be able to see what they are up to.

[cottonseed]

15. Who could have imagined?

Who could have imagined Oil men would invade oil rich countries and quadruple the price? Who could have imagined that an expert in Russian history missed the largest terror attack ever committed on the US. Who could have imagined a former CEO of Goldman holding 700 million in stock would want to bail himself and his buddies out on the taxpayer dime?

[mzmolly]

16. Absolutely!

:grr:

[Frank Booth]

17. No wonder he wants to rush this through.

Even if he thinks he's doing the right thing, there's no way this plan can avoid the taint of self-interest.

Resignation is the only solution.

[avaistheone1]

21. When this hits the light of day, the American public is going to say NO way NO how.

[wmbrew0206]

23. According to Pew, 57% of Americans support the bail out

http://people-press.org/report/452/public-favors-bailout

[avaistheone1]

25. Yet according to Rasmussen Only 25 percent of Americans support bailout plan

A new Rasmussen poll conducted on Monday finds that 44 percent of Americans oppose the Bush administration’s $700 billion bailout plan, up from 37 percent a day earlier. Twenty-five percent support it, and 31 percent are undecided. Thirty-five percent believe it will help the economy, while 30 percent say it will hurt it. (HT: LA Times)

http://thinkprogress.org/2008/09/23/poll-bailout/

[avaistheone1]

24. Was Paulsen's financial position stated at the beginning of today's hearing?

It certainly puts things in a different light and shows how self-serving Paulsen's statements today are.

[wmbrew0206]

29. GS is actually sitting pretty right now, since they realized the problem with MBS and got out

of them earlier than anyone else.

[anonymous171]

26. Wow. Conflict of interest much?

[ContinentalOp]

27. He should be forced to resign and no decision should be made on the bailout until he is replaced...

and the replacement can draw up a new plan.

[grannylib]

32. He should resign. Now. And take that butt-ugly, stupid piece of shit with him.

[Az_lefty]

34. he should be investigated...these SOB's are all linked together

like a series of tubes, sort of like the intenet.

[vanderBeth]

36. Are you serious

This is such bullshit!

[Imagevision]

37. How many Americans support the bailout with no oversight and no regulating...?

[Bread and Circus]

38. I don't trust these assholes. We are in between a rock and a hard place.

[dchill]

40. It's getting harder and harder...

to decide which assholes to trust. ;)

[unblock]

41. he should be shamed into CONTRIBUTING his shares to the bailout fund.

[Vinca]

43. I always thought people in positions like this had to have blind trusts.

How on earth can they be unbiased when they know their mountain of money is in peril?

[HamdenRice]

44. This is misleading: Paulson DOES NOT own Goldman shares

Come on folks, there are real political and economic issues we face but let's not just make stuff up to get ourselves into a frenzy.

Like most wealthy people who take positions in an administration, Paulson was required by conflict of interest rules to divest or place in a blind trust assets that would affect their decision making.

There is a mini-scandal here, but it's not the one you think it is.

The article cited in the OP of this thread that suggests Paulson still owns $700 million in Goldman (and citing it gives the impression that his bailout is affected by his personal stake in Goldman) was written before Paulson had been confirmed in the Secretary job, and poses the question of whether he should divest.

It turns out that Paulson decided to divest his Goldman shares to take the job.

A federal law has been designed to prevent wealthy people from being dissuaded from entering public service because of the tax consequences of divestment. That law defers taxes on capital gains caused by the divestment for public service.

That means that Paulson deferred capital gains tax on hundreds of millions of dollars of Goldman stock, and depending on how long he takes until selling his new assets, the imputed interest on his deferred taxes could be worth tens of millions of dollars.

So, a $183,000 dollar a year job that looks like a wealthy man's sacrifice for public service was probably worth many millions of dollars

But no, he does not own Goldman stock:

http://money.cnn.com/2008/09/19/news/newsmakers/gunther_paulson.fortune/

That, he decided, was not a good enough reason to turn down a call to serve his country. (One fringe benefit was the capital gains tax exemption given to federal appointees who have to sell holdings before they take office: When Paulson sold his $500 million of Goldman Sachs stock, he saved tens of millions of dollars.)



http://www.forbes.com/2006/06/01/paulson-tax-loophole-cx_jh_0602paultax.html

A Loophole For Poor Mr. Paulson

WASHINGTON, D.C. - For Henry Paulson Jr., a Goldman-sized tax loophole awaits his pleasure.

High-flying business executives almost always endure financial sacrifice when they make a detour into public service. Paulson is no different: The Goldman Sachs (nyse: GS - news - people ) boss will see his annual paycheck shrink from last year's $38 million to a paltry $183,500 once he takes over the job of Treasury secretary.

But don't shed too many tears for Paulson. He has amassed quite a fortune--a roughly $700 million equity stake in Wall Street's premier investment banking house. And soon, he will have the chance to diversify a good chunk of those holdings without paying a dime to the Internal Revenue Service.

By accepting the Treasury post, Paulson is poised to take advantage of a tax loophole that allows government officials to defer capital gains taxes on assets they have to sell to avoid a conflict of interest, as long as the proceeds are reinvested in government securities or a broad array of mutual funds approved by the government within 60 days.

[wmbrew0206]

45. ^^^^^^Very imformative post. Thank you.

[Lochloosa]

46. I thought the same thing. Thanks for the research. My first "Skip It"

[Arkansas Granny]

48. Thanks for clearing that up.