The Securities and Exchange Commission has subpoenaed firms represented at Treasury Secretary Henry Paulson's meeting with money managers at which he disclosed to them his plans to seize Fannie Mae and Freddie Mac while he was telling the public something else, the Wall Street Journal reports.
If the SEC can't get to the bottom of it, maybe the U.S. attorney's office for the Southern District, the New York State attorney general's office, or the district attorney of New York County can. It doesn't get much more newsworthy than this: it goes right to the heart of how the financial crisis deepened and how government action, rather than stabilizing things, made it worse, creating a panic where there had been none because of the fear that the government would go around seizing private companies from the investors who owned them.
Two things need to be found out:
First, what was discussed. There are many ways that somebody can tip off people, especially when a lack of confidence itself was used to justify the seizure.
Second, whether any of the participants in the meeting traded in Fannie or Freddie from the time of the meeting until the seizure. Even if they didn't trade, it still doesn't make it appropriate for the Treasury secretary to have tipped them off. Of course, one or more participants whether they traded or not could have tipped off journalists or analysts or other traders who were contributing to the uncertainty and fear at the time.