Courtesy of Pam Martens.
As the U.S. sinks to a rank of 19 on Transparency International’s list of the least corrupt countries, President Obama has issued a proclamation declaring this to be the week that we come together as a Nation to reflect on our moral values. The President’s Proclamation reads in part:
“…During National Character Counts Week, we reflect on the ways we support one another, the ways we come together and seek common ground, and the lessons we teach our children about what citizenship means in the United States of America…The children we raise today are surrounded by proud examples of integrity, and moral courage, but it is our task as parents, community members, and leaders to teach them not only the skills they need to succeed, but also the values that keep our country strong…”
Yes, our children are surrounded by wonderful, wholesome role models – from parents to teachers to community volunteers. But something insidious is happening elsewhere in our Nation that is polluting the minds of college students to believe that amoral behavior is a condoned fast track to business success in America. Specifically, individuals who have had serious and credible charges of corruption leveled against them are being held up as the epitome of good business role models. New York University stands out for this behavior.
Take the case of hedge fund manager, John Paulson, who has an auditorium named after him at New York University’s Stern School of Business as well as serving on the University’s Board of Trustees. (The naming followed a $20 million donation to the university by Paulson.)
On April 16, 2010, the SEC accused Paulson’s hedge fund of conspiring with Goldman Sachs in the infamous 2007 ABACUS deal “to structure a transaction in which Paulson & Co. could take short positions against mortgage securities chosen by Paulson & Co. based on a belief that the securities would experience credit events.” In other words, Paulson helped to build a portfolio designed to fail with a motivation of self enrichment.
The SEC complaint goes on: “…after participating in the portfolio selection, Paulson & Co. effectively shorted the RMBS [Residential Mortgage Backed Securities] portfolio it helped select by entering into credit default swaps (CDS) with Goldman Sachs to buy protection on specific layers of the ABACUS capital structure. Given that financial short interest, Paulson & Co. had an economic incentive to select RMBS that it expected to experience credit events in the near future. Goldman Sachs did not disclose Paulson & Co.’s short position or its role in the collateral selection process in the term sheet, flip book, offering memorandum, or other marketing materials provided to investors.”
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