When former Goldman Sachs exec Henry Paulson was Treasury Secretary he apparently gave his hedge fund buddies extremely helpful and lucrative secret information about his plans to seize Fannie Mae and Freddie Mac while still assuring the public everything was fine. To a room full of hedge fund mangers, including many of his former colleagues, Paulson let it be known the companies would soon go into conservatorship. From Bloomberg (I highly recommend you read the whole shocking article):

Paulson explained that under this scenario, the common stock of the two government-sponsored enterprises, or GSEs, would be effectively wiped out. So too would the various classes of preferred stock, he said.

The fund manager says he was shocked that Paulson would furnish such specific information — to his mind, leaving little doubt that the Treasury Department would carry out the plan. The managers attending the meeting were thus given a choice opportunity to trade on that information.

This is an important reminder that we don’t have a meritocracy. We don’t have a fair or free market. Many of the people at the very top with all the wealth are not now making incredibly more money than regular Americans because they are super genius Galtian “job creators.”

Many of these people are making huge sums of money because we have a system rigged for them, by them. A well trained gorilla could become insanely rich if it had the triple benefit of the Treasury Secretary giving it incredibly useful insider information, the Fed giving it effective interest free loans, and the special carried interest tax loophole so it paid a lower tax rate than a school teacher.

If our top government officials showered regular Americans with even one tenth of the favoritism they have shown to Wall Street, I doubt we would have people protesting in the streets right now.

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