Jeff Smith noon, March 8
The Next Duke Cunningham? Hank Paulson, Treasury Secretary
The felonious former San Diego County Congressman Duke Cunningham started on his way to ill-gotten riches by getting a person seeking political favors to pay an outlandish price for the Cunningham house. Duke parlayed that -- plus other scams -- into a Rancho Santa Fe spread, and eventually a place in the penitentiary. Now, Treasury Secretary Hank Paulson is pulling the same stunt, says financial writer William Greider of "The Nation" magazine. Greider uses information dug up by the United Steelworkers. Under his bailout program, Paulson arranged to have the Treasury invest $10 billion in Wall Street's Goldman Sachs, of which Paulson is former chief executive. But not long before the Treasury deal, private investor Warren Buffett invested half what the Treasury plunked into Goldman -- $5 billion -- and got a much better deal. Both the Treasury and Buffett got preferred stock plus warrants to purchase common stock in the future. Buffett got preferred stock in Goldman yielding 10 percent. The Treasury got preferred yielding only 5 percent. Dollar for dollar, Buffett "received at least seven and perhaps up to 14 times more warrants than Treasury did and his warrants have more favorable terms," Greider quotes Steelworkers President Leo W. Gerard saying. All told, the Treasury invested $125 billion in a group of banks, including Goldman. The Treasury might have gotten only $62.5 billiion in value, says the union.