Paulson Tipped Hedge Funds

In the summer of 2008, Treasury Secretary Henry Paulson told reporters—and the Senate—that Fannie Mae and Freddie Mac should and would remain in the hands of shareholders. He wasn't so tightlipped with his former Wall Street pals, however. A new Bloomberg Markets magazine article details how Paulson, a former Goldman Sachs chief, laid out for certain hedge funds plans for a government takeover of Fannie and Freddie in July 2008. After the meeting, the lawyer of one of the hedge-fund managers who attended warned his client that Paulson's talk was material nonpublic information and he should immediately stop trading Fannie and Freddie shares.