Just when he thought he was getting out, they pull him back in.
In this case, it’s Hank Paulson who thought he was getting out–the outgoing head of Goldman Sachs is preparing to leave Wall Street for his new role as the next Treasury Secretary–and Richard Grasso, the former boss of the NYSE, who may pull him back in.
CNBC’s Charles Gasparino is reporting that Grasso served Paulson with a subpoena. Or, more likely, lawyers who work for the one served a subpoena to lawyers who worked for the other.
New York Attorney General has launched a lawsuit against Grasso, claiming his pay package at the NYSE violated New York laws requiring that compensation at non-profits be reasonable. Spitzer wants Grasso to return $100 million of the $140 million he got in compensation while running the NYSE. At the time the NYSE was a non-profit organization.
Paulson sat on the board of the NYSE and is said to have led the push to force Grasso to resign amidst public scandal over the size of the pay package in 2003. Despite this, Paulson’s testimony may help Grasso since Paulson has praised Grasso’s work as an executive. (Alternatively, and we’re just speculating here, Grasso may just want a chance to embarrass one of the people who forced him out of the NYSE.) Gasparino reports that Grasso’s lawyers fear that once Paulson assumes his job at the Treasury he may attempt to claim an executive branch immunity and avoid being forced to testify.
Spitzer. Grasso. Paulson. It’s 2003 all over again. But this time its personal.
Paulson Subpoena [SquawkBlog]
Treasury
A DealBreaker source connected to the White House reports that some high-level members of the administration are annoyed by reports that Hank Paulson continues to play a role in talks to split the presidency of Goldman Sachs. Paulson, the CEO and chairman of Goldman, was recently nominated by George Bush to succeed John Snow as Treasury Secretary.
“Folks think he should be concentrating on his new job, not trying to secure the value of his Goldman stock by meddling with its succession issues,” the source said.
The source asked to remain confidential. Specifically, the source said, “You guys kill blogs everytime you mention them. Imagine what will happen to me.”
A note of caution after the jump.
Daniel Gross points out on Slate today that Treasury nominee Hank Paulson might have a problem divesting himself of his Goldman shares. Or, rather, he might not have doing anything with all the money he’d make from the sale. There’s too much of it!
Once he sells, Paulson—or whoever will manage his blind trust—will have a new problem. In order to qualify for the certificate of divestiture, the cash must be invested in a diversified fund, such as a stock mutual fund. But Paulson’s portfolio is so large that it doesn’t make sense to put it into a mutual fund, or even into a whole bunch of funds. A nest egg of this size should be broadly diversified—some real estate and a few hedge funds, a few private equity funds, commodities, stocks from all over the world, a private island or two. And of course, all of these have the potential to be affected by Paulson’s actions while he is in office.
Gross’s solution: let Paulson keep his Goldman shares.
One of DealBreaker’s hedge fund friends has another solution: have Paulson’s money be doled out to various investment vehicles via a lottery administered by a trustee. Of course, in order to avoid any conflicts of interests, we couldn’t let Paulson know where his money ends up. It’s a bit whacky but it could work.
Another alternative is to have one guy, or a couple of guys, put in charge of investing all those Paulson millions as trustees of a blind trust. This essentially would create a sort of private hedge fund of Paulson’s money. This is another idea our hedge fund friend endorses–providing he gets to be the trustee.
The Goldman Rule [Slate]
Yesterday we speculated that some sort of force of cosmic justice had caused Daniel Gross to back up his wild predictions on Slate with a promise to eat the first chapter of a book of someone else’s wild predictions. Eddy Elfenbein wonders if it isnt something else, something lurking deep inside Gross’s grey matter.
But there’s something about Gross and Dow 36,000. He has a rather bizarre history with this book. I’m not sure what to call it. An obsession? Gross simply MUST reference it, no matter how tangential it is to his topic. He can’t not do it. As “wine-dark” is to sea,” Dow 36,000 is to…well, everything! Especially everything Republican.
Read the whole thing, as they say.
The Objection of Gross’ Affection [Crossing Wall Street]
The market has closed for the day so let’s take a moment to get all philosophical. Or at least to marvel at the ironic justice of the world.
We’ve been hammering away at Slate writer Daniel Gross for the last couple of days. It’s not because we have anything against Gross.
Somehow we missed an item in yesterday’s NY Sun reporting that Slate reporter Daniel Gross will actually eat the first chapter of Dow 36,000. Several weeks ago, Gross predicted that Bush would be unable to fill the Treasury Secretary slot with an “A-List” Wall Street executive, and he backed up this prediction with a promise to eat the first chapter of the famous bubble-era book of stock market enthusiasm. When Goldman Sachs CEO Hank Poulson was appointed to the Treasury by Bush, we offered to spring for Gross’s first chapter meal.
Paulson Selection Makes Analyst Eat Words (Literally) [New York Sun]
Yesterday we pointed toward some rumbling on the Republican right about George Bush appointing Hank Poulson Treasury Secretary. The rumbling continues, although it has not yet grown into a full on right-wing thunderstorm. Rick Karlgaard flipped from praising Poulson to warning against him. Human Events, America’s oldest conservative newspaper, points out Paulson’s donations to Democrats. The National Legal and Policy Center blasted the nomination.
Human Events adds: “At a time when the Bush Administration desperately needs to salvage its standing with conservatives, it has had another Harriet Miers moment.”
Is this really another Harriet Miers moment, with the President’s favored nominee going down due to criticism by his base? Has bungling Iraq, Katrina, domestic spending and Meyers set the once steadfastly pro-Bush conservatives reflexively against him?
We guess that’s probably a bit too much to hope for.
- Use the Bloomberg command
NH BLG_DEALBREAKER <GO>
to access Dealbreaker
