Friedman says he wasn’t involved in the Fed's decision to give AIG an $85 billion bailout, part of which was used to repay debts to Goldman. Well, maybe. But the rule against insider trading is supposed to be a prophylactic and its application doesn't depend on whether the insider participated in a particular corporate decision.
Even if there’s no problem with Friedman’s initial GS share position, the additional purchases are a different matter, particularly since Friedman never told the Fed about those purchases and never asked for a waiver.
Friedman says he bought the shares because they were “cheap.” What does that mean? In an efficient market, shares are “cheap” only if you know something. What did Friedman know? He bought shares in a bank while he was working for a branch of the agency that was running banking (not to mention the rest of the economy). Could he have known something?
As it turned out, Friedman bought the shares at prices ranging from $66 to $80/share which were trading at $127.08 on Friday, for an accrued gain of $2.7 million.
While Congress and the SEC are investigating those hedge funds, do you think maybe they could find some time for Mr. Friedman?
Friday, May 08, 2009