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STEARNS REQUESTS INVESTIGATION BY FINANCIAL COMMISSION INTO CHARGES BY FORMER FEDERAL REGULATORS OF CONFLICT OF INTEREST BY FORMER TREASURY SECRETARY PAULSON

Nov 3, 2010

BASED UPON NEW EVIDENCE THAT PAULSON FAILED TO ACT WELL BEFORE THE FINANCIAL MELTDOWN

Washington, Nov 3, 2010 - Noting statements by former regulators, Rep. Cliff Stearns (R-FL) is urging the Financial Crisis Inquiry Commission (FCIC) to investigate former Treasury Secretary Henry Paulson who the regulators indicated had a clear conflict of interest and deliberately acted in the best interest of his former firm, Goldman Sachs. Said Stearns, “Mr. Paulson’s inaction and perhaps intentional failure to perform a required duty during his first 15 months as Secretary reveal his complicity in putting Wall Street before Main Street.” Stearns wrote to Phil Angelides, Chairman of the FCIC, outlining how Paulson failed to take action to address the housing bubble because it would have harmed the financial position of Goldman Sachs (a copy of this letter is attached).


In his letter, Stearns included a statement from former thrift regulator William Black who noted that “No one was better positioned…than Mr. Paulson to understand exactly what the implications of his moving against the (housing) bubble would have been for Goldman Sachs, because he knew what the Goldman Sachs positions were.” Mr. Black testified before the FCIC on September 21, 2010, adding that Paulson “knew that if he acted the way he should, that would have burst the bubble. Then Goldman Sachs would have been left with a very substantial loss, and that would have been the end of bonuses at Goldman Sachs.”

Stearns also cited a statement to Congress by Richard Newsom, former senior thrift examiner and key investigator of the Lincoln Savings and Loan collapse of the 1980s. Newsome said that it was “simply implausible that Paulson couldn’t see the relation between delaying strong action by Treasury and the benefit to letting places like Goldman” reduce their risks.

In addition, Stearns points out that Paulson was not fully divested from Goldman Sachs. Explained Stearns, “An article in the Miami Herald reports that while Paulson made the divestments required under government ethic rules, his wife and son remained trustees of the Paulson’s Bobolink Foundation, that held more than $100 million in Goldman Sachs stock.”
 
Letter ( 04/25/11 11:14 AM PST )