Buffett considers this "free money". Buffett also knows that at the end of the day, there will be a lot fewer big banks remaining.....but his will be among them.....and they will make "above normal" profits in the future because a lot of competition will have been eliminated..... All in all....a win win for Buffett and his clients..... Society will pay up for banking in the future because of diminished competition.... That is of course if things remain relatively the same.... Which it will not.... .................................................. With so many developing markets even further under water than the US.....I am certain that Templeton would be averaging stocks for the next 24+ months..... Both Templeton and Buffett have long term views.....and both know/knew when to enter.......and have/had a lot of patience.... There are several companies whose stock do not even reflect the cash they hold.....Templeton would love this....
. October 18, 2008 SouthAmerica: Reply to Libertad You are right. Mr. Templeton would be in haven right now with the current state of all stock markets around the world. From his perspective he would be looking into the future and he probably would be investing at the right time in places such as China since their stock market has been down by 70 percent â Russia also is down 70 percent â Brazil is down 56 percent - and he was a master anyway and he would know where to find value, and he would be aware of which companies were ready for him to pick them up at bargain prices. I have a feeling that he would be avoiding the United States stock market like the plague. Because he would recognize that the days of an international monetary system based on the US dollar would be over very soon â because we have reached the end of the line for the US dollar as the major reserve currency around the world. He would hate to invest in a country that has nationalized its largest insurance company (AIG), its largest mortgage companies (Fannie/Freddie), partly nationalized its nine major banks and its only 2 remaining investment banks turned into banking holding companies. A country stuck into 2 wars (Iraq and Afghanistan) that are costing a fortune and with no prospects of an end in sight. A country that already has $ 10 trillion dollars in cumulative debt and on top of that it has added to that figure another $ 2.3 trillion dollars in debt in just a matter of months. A government that will be running based on deficit spending to the tune of $ 1 trillion dollars per year for many years to come. A country that its government is giving government guarantees estimated in the trillions of US dollars as if there were no cost attached to that. A country that is completely out of control and started believing for many years now that the credit of the US government is infinite and have been acting accordingly to this belief. He was always looking into the future and he would have grasped that the US economy is shrinking in terms of the global economy and that the United States is losing very fast the special status that the US economy had in global affairs in the last 65 years including the special role that the US dollar has played in the international monetary system. He would be aware that the free market economy that the United States used to have is in critical condition and if wasnât for the massive Panic US government nationalizations that we had in a very short period of time then the entire system would have collapsed into a massive financial and economic meltdown. He also would have grasped that the current massive US government intervention in the workings of a free market economy and massive nationalizations would just keep a very sick patient from dying a sudden death, but these government interventions would prevent the system from healing itself and from getting rid of the sick parts of the US financial and economic system. This massive US government intervention, nationalization, and all kinds of US Panic government guarantees is just a band aid to keep the entire system artificially alive and full of all kinds of distortions â no wonder the US banks don't trust one another. Contrary to what Mr. Buffett said yesterday that he would be investing here in the United States right now, I am sure that Mr. Templeton would be concentrating his investing around the world where he would know how to find the real golden nuggets of the future. I donât know if he would be buying right now, or if he would wait a while longer when stocks around the world could be even cheaper than today. I am sure that he would know when was the right time to start buying again. .
Seems to me that the Colonel that you so admired is a typical example of wall street insiders taking care of their own and screw the little guy. If that wasn't insider trading what was it?
. Heypa: Seems to me that the Colonel that you so admired is a typical example of wall street insiders taking care of their own and screw the little guy. If that wasn't insider trading what was it? ***** October 18, 2008 SouthAmerica: The difference between what Mr. Liddell did and what usually goes on in Wall Street is that Mr. Liddell gave a chance for all the people who he had advised about buying that bank stock â and people had done very well over the years until the bank got in trouble â he gave a chance for all these people to sell their stock before he sold his position â and because he acted that way he lost a lot of money in that stock, millions of dollars. He acted like a Captain the last one to leave the sinking ship. The usual way most Wall Street executives have been acting for a long time â they tell the public how the company is doing well and how people donât have anything to worry about, as a matter of fact he would suggest that people should invest more money on this company that is doing very well, but in the meantime this executive is selling his shares on this company as fast as he can before people can figure out what is really going on. If you consider Mr. Liddell a insider trader then he is the type of person who gives inside trading information that makes him lose millions of dollars. And if we had more insider traders like Mr. Liddell then we would have a much healthy stock market in the US and people would trust the system. Mr. Liddell probably said on his memo to his clients that he recommended that they sell the shares of this particular bank, and he also said that he had a large position and he would wait to sell his holdings until all his clients who wanted to sell that stock would have the chance to go ahead a dispose of that investment. I am not sure if that would be considered to be insider trading, since he probably told his clients that he also had shares on that company when his clients bought the stock, and now he was just letting them know that he was selling his position on that stock at this time. .
Words to rationalize by. He advised his friends to get out before he initiated an action he knew would impact the share price adversely. Whether he personally gained or lost is immaterial. The uninformed public lost! His friends didn't. If that wasn't an illegal action it should have been!
. October 19, 2008 SouthAmerica: Mr. Liddell had told his clients that he would wait them to sell their holdings before he started selling his position. When his clients started selling it became public information that the bank was in financial trouble, and the public also started unloading their shares, but Mr. Liddell waited until all his clients had sold all the stock that they had, until finally he sold his position. But by that time the stock had become almost worthless and he took a beaten on that investment. He lost millions of dollars, but he kept his word and he was the last one to leave the sinking ship. I donât know anyone in this day and age that would do today what Mr. Liddell did at that time. Today the executives of most corporations would deceive everybody as long as they could to give them time to unload their position on the stock before everybody else. Mr. Liddell was not the type of person who traded on inside information. He had been working very closely with Mr. Templeton for decades and these guys were too smart and they did a fantastic job themselves without the need of any inside information. .
Southamerica you make no sense. Buffett's interests are known. The price and conditions of his most recent investments are known. It's pretty above board. Considering he did buy into these companies it stands to reason he thinks it is a good time to buy. Now he can publicly say nothing or say it is a good time to buy. You think it is preferable he said nothing? But wouldn't that be the same thing as Col. Liddell not saying anything? Your hurl brickbats at someone willing to put their name on the line in the name of another august investor who is no longer around. You may have associated with Templeton but you are no Templeton.
. Part 1 of 3 Capablanca: Southamerica you make no sense. Buffett's interests are known. The price and conditions of his most recent investments are known. It's pretty above board. Considering he did buy into these companies it stands to reason he thinks it is a good time to buy. Now he can publicly say nothing or say it is a good time to buy. You think it is preferable he said nothing? But wouldn't that be the same thing as Col. Liddell not saying anything? Your hurl brickbats at someone willing to put their name on the line in the name of another august investor who is no longer around. You may have associated with Templeton but you are no Templeton. ***** October 20, 2008 SouthAmerica: First I had the honor to work for Mr. Templeton for a few years, and being associated with many of his associates for a long time. I know what kind people Mr. Templeton and Mr. Liddell were regarding their integrity, high character, high moral, ethics, honesty, basically we donât have too many people like that around anymore, and I am just disappointed because until recently I thought Mr. Warren Buffett also belonged to this very special dying breed Colonel Liddell would never put himself in a million years in the position that Warren Buffett finds himself today regarding his connections with the Treasury Secretary Paulson, Goldman Sachs, the Wells Fargo/Wachovia deals, and the handouts that the Us government gave to these corporations. John M. Templeton was unique and the smartest man that I ever met. To achieve the legend status that Mr. Templeton has achieved you need a winning track record of over 50 years in the investment field with constant and spectacular results, and as far as I am aware of the only other person who is in the same league with Mr. Templeton it is Mr. Warren Buffett - and George Soros. But I know enough about Mr. Templetonâs investment philosophy to tell you at least 3 things for sure: 1) Mr. Templeton was always looking for bargains. He was a bargain hunter, and the real bargains today people can find it in stock exchanges around the world, such as in China, Russia, and Brazil. 2) He hated government intervention of any kind because that distorted the workings of the free market, and prevented the system from adjusting itself. 3) The massive US government nationalization of private companies as we just had in the United States in recent months would drive Mr. Templeton out of the US market at the speed of light. And on top of that with all the US government interventions in all kinds of ways in the US financial markets he would move most of his investments out of such a market because he knew that these interventions would cause all kinds of distortions and would create an artificial market full of worthless information, and worthless financial valuations. ***** I already had connected the dots and I had a very good understanding about the dirty business that is going on in Washington regarding the current financial crisis. But today when I was reading the main story on the business section of Sunday edition of The New York Times âThe Guys From âGovernment Sachsââ - there was one thought that came to my mind, there is only two words that could summarize that article in a nutshell: Widespread Collusion. The world has a complete lack of trust in the US financial markets right now, and after reading The New York Times article where they exposed the widespread collusion that is going on regarding Goldman Sachs and the US government officials during the current financial crisis â if there are any honest people working for the US government today then this is the time for them to rise to the occasion and start a major investigation about the role that Goldman Sachs and its cronies played in the demise of Lehman Brothers. In my opinion, the US government should stop investigating right now Lehman Brothers former chief executive Richard S. Fuld Jr., and they should put all the resources available and start investigating the role that Goldman Sachs and its network of alumnus played regarding the bankruptcy of Lehman Brothers which cause a chain reaction of financial events around the world. As The New York Times article said: âTHIS summer, as he fought for the survival of Lehman Brothers, Richard S. Fuld Jr., its chief executive, made a final plea to regulators to turn his investment bank into a bank holding company, which would allow it to receive constant access to federal funding. Timothy F. Geithner, the president of the Federal Reserve Bank of New York, told him no, according to a former Lehman executive who requested anonymity because of continuing investigations of the firmâs demise. Its options exhausted, Lehman filed for bankruptcy in mid-September. ⦠Mr. Geithner, 47, played a pivotal role in the decision to let Lehman die and to bail out A.I.G. A 20-year public servant, he has never worked in the financial sector.⦠After working at the New York consulting firm Kissinger Associates, Mr. Geithner landed at the Treasury Department in 1988, eventually catching the eye of Robert E. Rubin, Goldmanâs former co-chairman. Mr. Rubin, who became Treasury secretary in 1995, kept Mr. Geithner at his side through several international meltdowns, including the Russian credit crisis in the late 1990s. Today when I was talking about this The New York Times article with a friend of mine, he asked me what I thought about this article? I told him that after reading this article there is only one conclusion that you can get from all this information: it seems to me that these guys are operating just like a Mafia. It looks even more suspicious today why the US government did not rescue Lehman Brothers and a few days latter they rescued AIG. Was that a way for Goldman Sachs to eliminate their direct competition? ***** Collusion: A secret agreement between two or more parties for a fraudulent, illegal, or deceitful purpose. ***** âThe Guys From âGovernment Sachsââ By JULIE CRESWELL and BEN WHITE Published: October 19, 2008 The New York Times THIS summer, when the Treasury secretary, Henry M. Paulson Jr., sought help navigating the Wall Street meltdown, he turned to his old firm, Goldman Sachs, snagging a handful of former bankers and other experts in corporate restructurings. In September, after the government bailed out the American International Group, the faltering insurance giant, for $85 billion, Mr. Paulson helped select a director from Goldmanâs own board to lead A.I.G. And earlier this month, when Mr. Paulson needed someone to oversee the governmentâs proposed $ 700 billion bailout fund, he again recruited someone with a Goldman pedigree, giving the post to a 35-year-old former investment banker who, before coming to the Treasury Department, had little background in housing finance. Indeed, Goldmanâs presence in the department and around the federal response to the financial crisis is so ubiquitous that other bankers and competitors have given the star-studded firm a new nickname: Government Sachs. The power and influence that Goldman wields at the nexus of politics and finance is no accident. Long regarded as the savviest and most admired firm among the ranks â now decimated â of Wall Street investment banks, it has a history and culture of encouraging its partners to take leadership roles in public service. It is a widely held view within the bank that no matter how much money you pile up, you are not a true Goldman star until you make your mark in the political sphere. While Goldman sees this as little more than giving back to the financial world, outside executives and analysts wonder about potential conflicts of interest presented by the firmâs unique perch. They note that decisions that Mr. Paulson and other Goldman alumni make at Treasury directly affect the firmâs own fortunes. They also question why Goldman, which with other firms may have helped fuel the financial crisis through the use of exotic securities, has such a strong hand in trying to resolve the problem. The very scale of the financial calamity and the historic government response to it have spawned a host of other questions about Goldmanâs role. Analysts wonder why Mr. Paulson hasnât hired more individuals from other banks to limit the appearance that the Treasury Department has become a de facto Goldman division. Others ask whose interests Mr. Paulson and his coterie of former Goldman executives have in mind: those overseeing tottering financial services firms, or average homeowners squeezed by the crisis? Still others question whether Goldman alumni leading the federal bailout have the breadth and depth of experience needed to tackle financial problems of such complexity â and whether Mr. Paulson has cast his net widely enough to ensure that innovative responses are pursued. âHeâs brought on people who have the same life experiences and ideologies as he does,â said William K. Black, an associate professor of law and economics at the University of Missouri and counsel to the Federal Home Loan Bank Board during the savings and loan crisis of the 1980s. âThese people were trained by Paulson, evaluated by Paulson so their mind-set is not just shaped in generalized group think â itâs specific Paulson group think.â Not so fast, say Goldmanâs supporters. They vehemently dismiss suggestions that Mr. Paulsonâs team would elevate Goldmanâs interests above those of other banks, homeowners and taxpayers. Such chatter, they say, is a paranoid theory peddled, almost always anonymously, by less successful rivals. Just add black helicopters, they joke. .
. Part 2 of 3 âThere is no conspiracy,â said Donald C. Langevoort, a law professor at Georgetown University. âClearly if time were not a problem, you would have a committee of independent people vetting all of the potential conflicts, responding to questions whether someone ought to be involved with a particular aspect or project or not because of relationships with a former firm â but those things do take time and canât be imposed in an emergency situation.â In fact, Goldmanâs admirers say, the firmâs ranks should be praised, not criticized, for taking a leadership role in the crisis. âThere are people at Goldman Sachs making no money, living at hotels, trying to save the financial world,â said Jes Staley, the head of JP Morgan Chaseâs asset management division. âTo indict Goldman Sachs for the people helping out Washington is wrong.â Goldman concurs. âWeâre proud of our alumni, but frankly, when they work in the public sector, their presence is more of a negative than a positive for us in terms of winning business,â said Lucas Van Praag, a spokesman for Goldman. âThere is no mileage for them in giving Goldman Sachs the corporate equivalent of most-favored-nation status.â MR. PAULSON himself landed atop Treasury because of a Goldman tie. Joshua B. Bolten, a former Goldman executive and President Bushâs chief of staff, helped recruit him to the post in 2006. Some analysts say that given the pressures Mr. Paulson faced creating a SWAT team to address the financial crisis, it was only natural for him to turn to his former firm for a capable battery. And if there is one thing Goldman has, it is an imposing army of top-of-their-class, up-before-dawn über-achievers. The most prominent former Goldman banker now working for Mr. Paulson at Treasury is also perhaps the most unlikely. ***** Picture: Joshua B. Bolten, top, a former Goldman executive, is President Bushâs chief of staff. Stephen Friedman, a former chairman of Goldman, is chairman of the New York Fed. This fall, as part of its bailout, the government put Edward M. Liddy, then a Goldman director, in charge of A.I.G. ***** Neel T. Kashkari arrived in Washington in 2006 after spending two years as a low-level technology investment banker for Goldman in San Francisco, where he advised start-up computer security companies. Before joining Goldman, Mr. Kashkari, who has two engineering degrees in addition to an M.B.A. from the Wharton School of the University of Pennsylvania, worked on satellite projects for TRW, the space company that now belongs to Northrop Grumman. He was originally appointed to oversee a $700 billion fund that Mr. Paulson orchestrated to buy toxic and complex bank assets, but the role evolved as his boss decided to invest taxpayer money directly in troubled financial institutions. Mr. Kashkari, who met Mr. Paulson only briefly before going to the Treasury Department, is also in charge of selecting the staff to run the bailout program. One of his early picks was Reuben Jeffrey, a former Goldman executive, to serve as interim chief investment officer. Mr. Kashkari is considered highly intelligent and talented. He has also been Mr. Paulsonâs right-hand man â and constant public shadow â during the financial crisis. He played a main role in the emergency sale of Bear Stearns to JP Morgan Chase in March, sitting in a Park Avenue conference room as details of the acquisition were hammered out. He often exited the room to funnel information to Mr. Paulson about the progress. Despite Mr. Kashkariâs talents in deal-making, there are widespread questions about whether he has the experience or expertise to manage such a project. âMr. Kashkari may be the most brilliant, talented person in the United States, but the optics of putting a 35-year-old Paulson protégé in charge of what, at least at one point, was supposed to be the most important part of the recovery effort are just very damaging,â said Michael Greenberger, a University of Maryland law professor and a former senior official with the Commodity Futures Trading Commission. âThe American people are fed up with Wall Street, and there are plenty of people around who could have been brought in here to offer broader judgment on these problems,â Mr. Greenberger added. âAll wisdom about financial matters does not reside on Wall Street.â Mr. Kashkari wonât directly manage the bailout fund. More than 200 firms submitted bids to oversee pieces of the program, and Treasury has winnowed the list to fewer than 10 and could announce the results as early as this week. Goldman submitted a bid but offered to provide its services gratis. While Mr. Kashkari is playing a prominent public role, other Goldman alumni dominate Mr. Paulsonâs inner sanctum. The A-team includes Dan Jester, a former strategic officer for Goldman who has been involved in most of Treasuryâs recent initiatives, especially the government takeover of the mortgage giants Fannie Mae and Freddie Mac. Mr. Jester has also been central to the effort to inject capital into banks, a list that includes Goldman. Another central player is Steve Shafran, who grew close to Mr. Paulson in the 1990s while working in Goldmanâs private equity business in Asia. Initially focused on student loan problems, Mr. Shafran quickly became involved in Treasuryâs initiative to guarantee money market funds, among other things. Mr. Shafran, who retired from Goldman in 2000, had settled with his family in Ketchum, Idaho, where he joined the city council. Baird Gourlay, the council president, said he had spoken a couple of times with Mr. Shafran since he returned to Washington last year. âHe was initially working on the student loan part of the problem,â Mr. Gourlay said. âBut as things started falling apart, he said Paulson was relying on him more and more.â The Treasury Department said Mr. Shafran and the other former Goldman executives were unavailable for comment. Other prominent former Goldman executives now at Treasury include Kendrick R. Wilson III, a seasoned adviser to chief executives of the nationâs biggest banks. Mr. Wilson, an unpaid adviser, mainly spends his time working his ample contact list of bank chiefs to apprise them of possible Treasury plans and gauge reaction. Another Goldman veteran, Edward C. Forst, served briefly as an adviser to Mr. Paulson on setting up the bailout fund but has since left to return to his post as executive vice president of Harvard. Robert K. Steel, a former vice chairman at Goldman, was tapped to look at ways to shore up Fannie Mae and Freddie Mac. Mr. Steel left Treasury to become chief executive of Wachovia this summer before the government took over the entities. Treasury officials acknowledge that former Goldman executives have played an enormous role in responding to the current crisis. But they also note that many other top Treasury Department officials with no ties to Goldman are doing significant work, often without notice. This group includes David G. Nason, a senior adviser to Mr. Paulson and a former Securities and Exchange Commission official. Robert F. Hoyt, general counsel at Treasury, has also worked around the clock in recent weeks to make sure the departmentâs unprecedented moves pass legal muster. Michele Davis is a Capitol Hill veteran and Treasury policy director. None of them are Goldmanites. âSecretary Paulson has a deep bench of seasoned financial policy experts with varied experience,â said Jennifer Zuccarelli, a spokeswoman for the Treasury. âBringing additional expertise to bear at times like these is clearly in the taxpayersâ and the U.S. economyâs best interests.â While many Wall Streeters have made the trek to Washington, there is no question that the axis of power at the Treasury Department tilts toward Goldman. That has led some to assume that the interests of the bank, and Wall Street more broadly, are the first priority. There is also the question of whether the departmentâs actions benefit the personal finances of the former Goldman executives and their friends. âTo the extent that they have a portfolio or blind trust that holds Goldman Sachs stock, they have conflicts,â said James K. Galbraith, a professor of government and business relations at the University of Texas. âTo the extent that they have ties and alumni loyalty or friendships with people that are still there, they have potential conflicts.â Mr. Paulson, Mr. Kashkari and Mr. Shafran no longer own any Goldman shares. It is unclear whether Mr. Jester or Mr. Wilson does because, according to the Treasury Department, they were hired as contractors and are not required to disclose their financial holdings. For every naysayer, meanwhile, there is also a Goldman defender who says the bankâs alumni are doing what they have done since the days when Sidney Weinberg ran the bank in the 1930s and urged his bankers to give generously to charities and volunteer for public service. âI give Hank credit for attracting so many talented people. None of these guys need to do this,â said Barry Volpert, a managing director at Crestview Partners and a former co-chief operating officer of Goldmanâs private equity business. âTheyâre not getting paid. Theyâre killing themselves. They havenât seen their families for months. The idea that thereâs some sort of cabal or conflict here is nonsense.â .
. Part 3 of 3 In fact, say some Goldman executives, the perception of a conflict of interest has actually cost them opportunities in the crisis. For instance, Goldman wasnât allowed to examine the books of Bear Stearns when regulators were orchestrating an emergency sale of the faltering investment bank. THIS summer, as he fought for the survival of Lehman Brothers, Richard S. Fuld Jr., its chief executive, made a final plea to regulators to turn his investment bank into a bank holding company, which would allow it to receive constant access to federal funding. Timothy F. Geithner, the president of the Federal Reserve Bank of New York, told him no, according to a former Lehman executive who requested anonymity because of continuing investigations of the firmâs demise. Its options exhausted, Lehman filed for bankruptcy in mid-September. One week later, Goldman and Morgan Stanley were designated bank holding companies. âThat was our idea three months ago, and they wouldnât let us do it,â said a former senior Lehman executive who requested anonymity because he was not authorized to comment publicly. âBut when Goldman got in trouble, they did it right away. No one could believe it.â The New York Fed, which declined to comment, has become, after Treasury, the favorite target for Goldman conspiracy theorists. As the most powerful regional member of the Federal Reserve system, and based in the nationâs financial capital, it has been a driving force in efforts to shore up the flailing financial system. Mr. Geithner, 47, played a pivotal role in the decision to let Lehman die and to bail out A.I.G. A 20-year public servant, he has never worked in the financial sector. Some analysts say that has left him reliant on Wall Street chiefs to guide his thinking and that Goldman alumni have figured prominently in his ascent. After working at the New York consulting firm Kissinger Associates, Mr. Geithner landed at the Treasury Department in 1988, eventually catching the eye of Robert E. Rubin, Goldmanâs former co-chairman. Mr. Rubin, who became Treasury secretary in 1995, kept Mr. Geithner at his side through several international meltdowns, including the Russian credit crisis in the late 1990s. Mr. Rubin, now senior counselor at Citigroup, declined to comment. A few years later, in 2003, Mr. Geithner was named president of the New York Fed. Leading the search committee was Pete G. Peterson, the former head of Lehman Brothers and the senior chairman of the private equity firm Blackstone. Among those on an outside advisory committee were the former Fed chairman Paul A. Volcker; the former A.I.G. chief executive Maurice R. Greenberg; and John C. Whitehead, a former co-chairman of Goldman. The board of the New York Fed is led by Stephen Friedman, a former chairman of Goldman. He is a âClass Câ director, meaning that he was appointed by the board to represent the public. Mr. Friedman, who wears many hats, including that of chairman of the Presidentâs Foreign Intelligence Advisory Board, did not return calls for comment. During his tenure, Mr. Geithner has turned to Goldman in filling important positions or to handle special projects. He hired a former Goldman economist, William C. Dudley, to oversee the New York Fed unit that buys and sells government securities. He also tapped E. Gerald Corrigan, a well-regarded Goldman managing director and former New York Fed president, to reconvene a group to analyze risk on Wall Street. Some people say that all of these Goldman ties to the New York Fed are simply too close for comfort. âItâs grotesque,â said Christopher Whalen, a managing partner at Institutional Risk Analytics and a critic of the Fed. âAnd itâs done without apology.â A person familiar with Mr. Geithnerâs thinking who was not authorized to speak publicly said that there was âno secret handshakeâ between the New York Fed and Goldman, describing such speculation as a conspiracy theory. Furthermore, others say, it makes sense that Goldman would have a presence in organizations like the New York Fed. âThis is a very small, close-knit world. The fact that all of the major financial services firms, investment banking firms are in New York City means that when work is to be done, youâre going to be dealing with one of these guys,â said Mr. Langevoort at Georgetown. âThe work of selecting the head of the New York Fed or a blue-ribbon commission â any of that sort of work â is going to involve a standard cast of characters.â Being inside may not curry special favor anyway, some people note. Even though Mr. Fuld served on the board of the New York Fed, his proximity to federal power didnât spare Lehman from bankruptcy. But when bankruptcy loomed for A.I.G. â a collapse regulators feared would take down the entire financial system â federal officials found themselves once again turning to someone who had a Goldman connection. Once the government decided to grant A.I.G., the largest insurance company, an $85 billion lifeline (which has since grown to about $122 billion) to prevent a collapse, regulators, including Mr. Paulson and Mr. Geithner, wanted new executive blood at the top. They picked Edward M. Liddy, the former C.E.O. of the insurer Allstate. Mr. Liddy had been a Goldman director since 2003 â he resigned after taking the A.I.G. job â and was chairman of the audit committee. (Another former Goldman executive, Suzanne Nora Johnson, was named to the A.I.G. board this summer.) Like many Wall Street firms, Goldman also had financial ties to A.I.G. It was the insurerâs largest trading partner, with exposure to $20 billion in credit derivatives, and could have faced losses had A.I.G. collapsed. Goldman has said repeatedly that its exposure to A.I.G. was âimmaterialâ and that the $20 billion was hedged so completely that it would have insulated the firm from significant losses. As the financial crisis has taken on a more global cast in recent weeks, Mr. Paulson has sat across the table from former Goldman colleagues, including Robert B. Zoellick, now president of the World Bank; Mario Draghi, president of the international group of regulators called the Financial Stability Forum; and Mark J. Carney, the governor of the Bank of Canada. BUT Mr. Paulsonâs home team is still what draws the most scrutiny. âPaulson put Goldman people into these positions at Treasury because these are the people he knows and there are no constraints on him not to do so,â Mr. Whalen says. âThe appearance of conflict of interest is everywhere, and that used to be enough. However, weâve decided to dispense with the basic principles of checks and balances and our ethical standards in times of crisis.â Ultimately, analysts say, the actions of Mr. Paulson and his alumni club may come under more study. âI suspect the conduct of Goldman Sachs and other bankers in the rescue will be a background theme, if not a highlighted theme, as Congress decides how much regulation, how much control and frankly, how punitive to be with respect to the financial services industry,â said Mr. Langevoort at Georgetown. âThe settling up is going to come in Congress next spring.â Source: http://www.nytimes.com/2008/10/19/b...&scp=2&sq="Julie Creswell"&st=cse&oref=slogin .