So Paulson's admission that he spoke with people on Wall Street regularly is fraught with inherent danger. That's especially a valid question after Paulson meets with the Fed chief, as he did on Aug. 16, 2007, when a crucial decision needed to be made.
The Fed indeed did surprise the markets by cutting interest rates by half a percentage point the next morning -- Aug. 17. And since it was the first of what turned out to be a long series of rate cuts, knowledge of what was about to occur did turn out to be extremely valuable.
I have often raised hell about this little charade. It was blatantly obvious that "certain inside people" had knowledge of what was to come the next morning -Options Expiration morning.
A huge number of people who were (correctly, based on the economic fundamentals) short, myself included, got literally corn-holed that morning - to the benefit of those certain "favored few" who were clearly told in advance and traded in front of it.
This sort of "very illegal" inside information trading has been part and parcel of this entire mess. It is part and parcel of how we have a couple of firms, one in particular (cough-Goldman-cough!) who manage to make money on their "proprietary trading"virtually every day in a quarter, a statistically-improbable outcome akin to that of getting hit in the head by a meteorite when one goes to get their mail.
This, of course, is not the only example. We had a similar event occur when the SEC announced
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