A Gentleman’s view.

I’ve just watched Newt Gingrich praise the father of Rep. John Dingell (D-Mich.) as “one of the great stalwarts of the New Deal, a man who, as an FDR Democrat, created modern America. And I think that John and his father represent a tradition that we all have to recognize and respect.”

I heard him offer a shout-out to one of the most left-wing members of Congress. And then speak words that Robert F. Kennedy might well have said:

“If you cannot afford to leave the public housing project, you are not free. If you do not know how to find a job and do not know how to create a job, you are not free. If you cannot find a place that will educate you, you are not free.”

Gingrich said all this on Jan. 4, 1995, when he formally became House speaker. He doesn’t sound much like that today. To be blunt, he often sounds like a blend of demagogue and bully.

But those words provide an intriguing clue to the kind of candidate Gingrich might become: one with the potential to reach well beyond the “not-Mitt Romney” conservative on current display.

The Gingrich as demagogue-bully has been on frequent display this cycle. He won applause and cheers from audiences in and out of debates with the artful turning of very loaded language. If you’re looking to jail people for the financial crisis, start with Rep. Barney Frank (D-Mass.) and former Sen. Chris Dodd.

Unhappy with the way the nonpartisan Congressional Budget Office calculates the impact of spending and tax ideas? That’s because the CBO “is a reactionary socialist institution” and should be abolished.

You don’t like the liberal opinions of the 9th Circuit Court of Appeals? “Congress can say, ‘All right, in the future, the 9th Circuit can meet, but it will have no clerks.’ ‘By the way, we aren’t going to pay the electric bill for two years. And since you seem to be rendering justice in the dark, you don’t seem to need your law library either.’”

This is of a piece with Gingrich’s single most (in)famous bit of rhetorical excess. In his 2010 book, “To Save America,” he labeled today’s Democratic philosophy “secular socialism,” emphasizing “the secular-socialist machine represents as great a threat to America as Nazi Germany or the Soviet Union once did.”

Gingrich later backed away from the full implications of this. But given his past assertions that tie Democrats and liberals to “Woody Allen family values” and the Virginia Tech shootings, it’s hard to view his Nazi-Soviet language as a slip of the tongue.

So where is there a hint of a different Gingrich campaign? Odd as it seems, it’s in another assertion that, at first blush, sounds like yet another bit of Gingrich demagoguery.

Gingrich raised eyebrows, if not hackles, in a recent speech at Harvard by suggesting that children be put to work as school janitors.

“You say to somebody, you shouldn’t go to work before you’re what, 14, 16 years of age, fine,” Gingrich said. “You’re totally poor. You’re in a school that is failing with a teacher that is failing. I’ve tried for years to have a very simple model. Most of these schools ought to get rid of the unionized janitors, have one master janitor and pay local students to take care of the school. The kids would actually do work, they would have cash, they would have pride in the schools, they’d begin the process of rising.”

Taken literally, the idea sounds ludicrous: pre-adolescent kids doing demanding, at times dangerous, physical labor.

But look again at his central argument: letting kids in school work as part of their day. You know who suggested precisely that idea? Kennedy, some 45 years ago. He suggested that teenagers be permitted to leave school for part of the day for supervised work “to help earn money for their families and to nurture a work ethic in communities where jobs have all but vanished.”

Of course, Kennedy had a very different focus than Gingrich. His was less an effort to weaken unions, and more to expose poor school kids to a world beyond their neighborhood. Moreover, Kennedy suggested, a student starting at unskilled construction work might develop an interest in carpentry, even architecture.

The Gingrich of 1995 might well have embraced this vision — where neither paternalistic liberalism nor Darwinian conservatism frames the idea. The Gingrich we have seen on the campaign so far, however, has not shown much appetite for that kind of rigor. It’s apparently too tempting to win cheers by promising to let elitist liberal judges huddle in the dark.

But if that version of Gingrich were to emerge as the Republican nominee, it might send the Obama team reaching for the Maalox.

Jeff Greenfield has worked as a political analyst at CBS,

Treasury Secretary Henry Paulson stepped off the elevator into the Third Avenue offices of hedge fund Eton Park Capital Management LP in Manhattan. It was July 21, 2008, and market fears were mounting. Four months earlier, Bear Stearns Cos. had sold itself for just $10 a share to JPMorgan Chase & Co. (JPM)

Now, amid tumbling home prices and near-record foreclosures, attention was focused on a new source of contagion: Fannie Mae (FNMA) and Freddie Mac, which together had more than $5 trillion in mortgage-backed securities and other debt outstanding, Bloomberg Markets reports in its January issue.

Paulson had been pushing a plan in Congress to open lines of credit to the two struggling firms and to grant authority for the Treasury Department to buy equity in them. Yet he had told reporters on July 13 that the firms must remain shareholder owned and had testified at a Senate hearing two days later that giving the government new power to intervene made actual intervention improbable.

“If you have a bazooka, and people know you have it, you’re not likely to take it out,” he said.

On the morning of July 21, before the Eton Park meeting, Paulson had spoken to New York Times reporters and editors, according to his Treasury Department schedule. A Times article the next day said the Federal Reserve and the Office of the Comptroller of the Currency were inspecting Fannie and Freddie’s books and cited Paulson as saying he expected their examination would give a signal of confidence to the markets.

A Different Message

At the Eton Park meeting, he sent a different message, according to a fund manager who attended. Over sandwiches and pasta salad, he delivered that information to a group of men capable of profiting from any disclosure.

Around the conference room table were a dozen or so hedge- fund managers and other Wall Street executives — at least five of them alumni of Goldman Sachs Group Inc. (GS), of which Paulson was chief executive officer and chairman from 1999 to 2006. In addition to Eton Park founder Eric Mindich, they included such boldface names as Lone Pine Capital LLC founder Stephen Mandel, Dinakar Singh of TPG-Axon Capital Management LP and Daniel Och of Och-Ziff Capital Management Group LLC.

After a perfunctory discussion of the market turmoil, the fund manager says, the discussion turned to Fannie Mae and Freddie Mac. Paulson said he had erred by not punishing Bear Stearns shareholders more severely. The secretary, then 62, went on to describe a possible scenario for placing Fannie and Freddie into “conservatorship” — a government seizure designed to allow the firms to continue operations despite heavy losses in the mortgage markets.

Stock Wipeout

Paulson explained that under this scenario, the common stock of the two government-sponsored enterprises, or GSEs, would be effectively wiped out. So too would the various classes of preferred stock, he said.

The fund manager says he was shocked that Paulson would furnish such specific information — to his mind, leaving little doubt that the Treasury Department would carry out the plan. The managers attending the meeting were thus given a choice opportunity to trade on that information.

There’s no evidence that they did so after the meeting; tracking firm-specific short stock sales isn’t possible using public documents.

And law professors say that Paulson himself broke no law by disclosing what amounted to inside information.

Rampant Rumors

At the time, rumors about Fannie and Freddie were tearing through the markets. The government-chartered firms’ mandate, which continues today, is to buy mortgages from banks and repackage them into securities either for their own portfolios or to sell to others. The banks can then use the proceeds from those transactions to write new mortgages.

By mid-2008, delinquencies and foreclosures were soaring, and the GSEs set aside billions of dollars against future losses. In the first six months of 2008, they racked up net losses of $5.46 billion as they slashed dividends and marked down the values of their huge inventories of mortgage-backed securities.

On Wall Street, confusion reigned. UBS AG analyst Eric Wasserstrom on July 10 cut his share price target on Freddie to $10 from $28. The next day, Citigroup Inc. (C) analyst Bradley Ball reiterated a “buy” recommendation on the two GSEs. On July 12, the Times of London, without citing a source, reported that Paulson was contemplating a $15 billion capital injection into the firms.

Shares Rally

At the time Paulson privately addressed the fund managers at Eton Park, he had given the market some positive signals — and the GSEs’ shares were rallying, with Fannie Mae’s nearly doubling in four days.

William Black, associate professor of economics and law at the University of Missouri-Kansas City, can’t understand why Paulson felt impelled to share the Treasury Department’s plan with the fund managers.

“You just never ever do that as a government regulator — transmit nonpublic market information to market participants,” says Black, who’s a former general counsel at the Federal Home Loan Bank of San Francisco. “There were no legitimate reasons for those disclosures.”

Janet Tavakoli, founder of Chicago-based financial consulting firm Tavakoli Structured Finance Inc., says the meeting fits a pattern.

“What is this but crony capitalism?” she asks. “Most people have had their fill of it.”

A Lawyer’s Advice

The fund manager who described the meeting left after coffee and called his lawyer. The attorney’s quick conclusion: Paulson’s talk was material nonpublic information, and his client should immediately stop trading the shares of Washington- based Fannie and McLean, Virginia-based Freddie.

Seven weeks later, the boards of the two firms voted to go into conservatorship under the newly created Federal Housing Finance Agency. The takeover was effective Sept. 6, a Saturday, and the companies’ stock prices dropped below $1 the following Monday, from $14.13 for Fannie Mae and $8.75 for Freddie Mac (FMCC) on the day of the meeting. Various classes of preferred shares lost upwards of 85 percent of their value.

A complete list of those at the Eton Park meeting isn’t publicly available. A Treasury Department roster of those expected to attend, obtained by Bloomberg News under the Freedom of Information Act, includes Ripplewood Holdings LLC CEO Timothy Collins, who says, through a spokesman, that he didn’t participate.

Storied Investors

At least one fund manager who wasn’t listed in the FOIA document, Daniel Stern of Reservoir Capital Group, did attend, says the manager who described the meeting.

The gathering comprised some of Wall Street’s most storied investors. Mindich, a former chief strategy officer of New York- based Goldman Sachs, started Eton Park in 2004 with $3.5 billion, at the time one of the biggest hedge-fund launches ever. Singh, a former head of Goldman’s proprietary-trading desk, also began his fund in 2004, in partnership with private- equity firm Texas Pacific Group Ltd.

Lone Pine’s Mandel worked as a retail analyst at Goldman before joining Julian Robertson’s Tiger Management LLC, one of the most successful hedge funds of the 1980s and 1990s. He started his own firm in 1997. Och was co-head of U.S. equity trading at Goldman before founding Och-Ziff in 1994. The publicly listed firm managed $28.9 billion in November.

Goldman Alums

One other Goldman Sachs alumnus was at the meeting: Frank Brosens, founder and principal of Taconic Capital Advisors LP, who worked at Goldman as an arbitrageur and who was a protege of Robert Rubin, who went on to become Treasury secretary.

Non-Goldman Sachs alumni who attended included short seller James Chanos of Kynikos Associates Ltd., who helped uncover the Enron Corp. accounting fraud; GSO Capital Partners LP co-founder Bennett Goodman, who sold his firm to Blackstone Group LP (BX) in early 2008; Roger Altman, chairman and founder of New York investment bank Evercore Partners Inc. (EVR); and Steven Rattner, a co-founder of private-equity firm Quadrangle Group LLC, who went on to serve as head of the U.S. government’s Automotive Task Force.

Another person in attendance: Michele Davis, then-assistant secretary for public affairs at the Treasury Department, who now represents Paulson as a managing partner at public relations firm Brunswick Group Inc. In an e-mail response to Bloomberg Markets, she referred all questions to Paulson’s book on the financial crisis, “On the Brink” (Business Plus, 2010), which makes no mention of the Eton Park meeting.

Paulson Thinktank

Paulson is now a distinguished senior fellow at the University of Chicago, where he’s starting the Paulson Institute, a think tank focused on U.S.-Chinese relations.

Eton Park’s Mindich, Lone Pine’s Mandel, TPG-Axon’s Singh and Och-Ziff (OZM)’s Och all declined to comment through spokesmen. Reservoir’s Stern didn’t return phone calls. Altman, through a spokesman, confirmed his attendance and declined to comment further.

Brosens confirmed in an e-mail that he had attended and said he couldn’t recall details. A spokesman for Rattner acknowledged he attended and said he didn’t trade in Fannie Mae- or Freddie Mac-related instruments after the meeting. Chanos declined to comment.

A Blackstone spokesman confirmed in an e-mail that GSO’s Goodman attended the meeting. Blackstone doesn’t believe market- sensitive information was discussed, and in any event Blackstone didn’t take any positions in Fannie or Freddie between the luncheon and Sept. 6, he wrote.

Strong Short Interest

Records show that many investors were betting against Fannie Mae and Freddie Mac at the time. According to Data Explorers Ltd., a London-based research firm, short interest in Fannie Mae shares rose sharply in July, to 163 million shares on July 14 from 86.3 million shares on July 9.

Short Interest continued to rise, to 240 million shares, on the day of the Eton Park meeting; it hit 262 million on July 24, its high for the year. Freddie Mac’s short interest showed a similar trajectory.

Revelations about the meeting come at a sensitive time.

“The optics are awful; there’s no doubt about it,” says professor Larry Ribstein of the University of Illinois College of Law in Champaign. “Everyone knows that insider trading is a huge issue.”

Rajat Gupta, the former head of McKinsey & Co. who was a member of Goldman’s board, was indicted by a federal grand jury on Oct. 26 for disclosing nonpublic information on Goldman and other companies to Raj Rajaratnam, a hedge-fund manager who earlier in October was sentenced to 11 years in prison for profiting from inside information provided by a web of industry insiders, including Gupta.

Gupta has pleaded not guilty.

LightSquared Probe

Several U.S. agencies face increased scrutiny in Congress for possible improper disclosures or ties to hedge funds. Senators are looking into whether the U.S. Department of Education divulged nonpublic details about new rules being considered to regulate for-profit educational institutions to outsiders, including Steven Eisman, former managing director of FrontPoint Partners LLC, who held short positions in the sector.

Education Department spokesman Justin Hamilton denies any impropriety. Eisman hasn’t been accused of any wrongdoing.

In October, Republican Senator Charles Grassley of Iowa asked hedge-fund manager Philip Falcone for copies of all communications between his Harbinger Capital Partners and the Department of Commerce, the Federal Communications Commission and the White House. Grassley is looking into whether Falcone improperly sought to influence regulators and the White House while seeking approvals for LightSquared Inc., the company constructing a broadband wireless network his fund is bankrolling.

‘Government Information’

Robin Roger, general counsel for the fund’s management firm, says any assertion that the fund or LightSquared tried to improperly influence regulators is unfounded.

For government officials, the leaking of market-sensitive information, even if inadvertent, represents an ethical minefield.

“There’s a lot of government information out there, and the hedge funds are trying to get it,” says Richard Painter, a law professor at the University of Minnesota who advised the Bush administration on Paulson’s sale of his Goldman stock when he became Treasury secretary. “It’s a huge problem that has to be addressed.”

The rules for what can or cannot be disclosed by government officials are often either unclear or nonexistent.

Tipping Hands

“The bottom line is that senior-level people in Washington, in the name of keeping in touch with their stakeholders, are tipping their hands,” says Adam Zagorin, a senior fellow at the Project on Government Oversight, a Washington watchdog group. “You can’t prosecute them for insider trading if they didn’t trade the shares. You may not be able to even reprimand them. What the hell are the rules?”

An official such as Paulson has no legal obligation to keep material nonpublic information to himself, says Phillip Kaplan, partner for litigation at Manatt Phelps & Phillips LLP, where he specializes in securities and class-action cases.

“I don’t think a government person is liable,” he says. “He didn’t profit from the information or trade on it.”

In the rapidly evolving world of insider-trading prosecutions, that could change, says the University of Illinois’s Ribstein, adding that the U.S. Securities and Exchange Commission is taking a broader view of what constitutes insider trading. SEC Enforcement Director Robert Khuzami, who can bring only civil cases, and the Justice Department, which can mount criminal prosecutions, have cast their net wide, Ribstein says.

Small Players Sued

In addition to going after big names like Rajaratnam and Gupta, the authorities are suing and indicting smaller players who might not have been prosecuted in the past, like accountants and analysts at so-called expert networks, who sell their expertise to hedge funds.

The University of Missouri’s Black says there’s no question that the plan to take over Fannie and Freddie — however uncertain — was material nonpublic information that could not be lawfully traded on. “What Paulson said put those managers in an untenable position,” he says. “They were exposed to all kinds of liabilities.”

The situation also generates some sympathy for Paulson.

“It seems to me, you’ve got to cut the guy some slack, even if he tipped his hand,” says William Poole, a former president of the Federal Reserve Bank of St. Louis. “How do you prepare the market for the fact that policy has changed without triggering the very crisis that you’re trying to avoid? What is he supposed to say without misleading these people?”

Market Insights

Poole says government officials need to communicate with industry participants in order to gain insights into market conditions and gauge likely reaction to interventions.

Black says the Eton Park meeting was the wrong way to communicate to the markets.

“Wink, wink, nod, nod is no way to approach sensitive information,” he says.

Paulson often contacted Wall Street participants throughout his tenure, according to his calendar. On that July trip to New York alone, he talked to Lehman Brothers Holdings Inc. CEO Richard Fuld, Washington Mutual Inc. CEO Kerry Killinger and Citigroup senior adviser Rubin.

Morgan Stanley and BlackRock Inc. both helped the Federal Reserve and OCC prepare the reports on Fannie Mae and Freddie Mac that Paulson told the New York Times would instill confidence the morning of the Eton Park meeting.

‘Unsafe and Unsound’

Paulson learned by mid-August that the Federal Reserve had found the GSEs “unsafe and unsound,” he told the Financial Crisis Inquiry Commission, which was appointed by President Barack Obama and Congress to probe the causes of the financial collapse.

“We’d been prepared for bad news, but the extent of the problems was startling,” he wrote in “On the Brink.”

On Sept. 6, when the GSEs’ boards agreed to have their companies placed in conservatorship, full-year 2008 losses were projected to reach as much as $50 billion for Fannie Mae and $32 billion for Freddie Mac. In October 2011, the FHFA estimated the cost to taxpayers of rescuing the firms at $124 billion through 2014.

The manager who described the Eton Park meeting says he also discussed it with an investigator from the FCIC. The discussion was confirmed by a former FCIC employee.

That manager says he ended up profiting from his Fannie Mae and Freddie Mac positions because he was already short the stocks. On his lawyer’s advice, he stopped covering his short positions and rode Fannie and Freddie shares all the way to the bottom.

To contact the reporter on this story: Richard Teitelbaum in New York at rteitelbaum1@bloomberg.net.

In Bed With The Enemy: A Bush Family Tradition

A cold chill went up the collective spine of Washington officials in early 2006 when China destroyed a weather satellite orbiting the earth. The test showed that China has the capability of crippling U.S. military and civilian satellites during any future confrontation.

Since the test there’s been a lot of criticism of the Bush Administration for not signing a ban on space weaponry when it had the chance.

How did China develop this technology?

Ask Neil Bush. He sells computer technology to the Chinese government. (He also consults with them as an expert on ways to avoid the penalties of the Patriot Act.) Not that there’s anything wrong with selling weapons-related technology to America’s enemies. It’s a Bush family tradition.

Neil’s great-grandfather Samuel Prescott Bush sold arms to the Kaiser prior to and during World War One and was labeled Germany’s “Merchant of death” in a post-war investigation.

Neil’s other great-grandfather George Herbert Walker helped finance the Nazi war machine including construction of the factories and rail lines at Auschwitz. He was one of Hitler’s most important financial backers in the United States.

Neil’s grandfather Prescott Bush eventually became a U.S. Senator, but he, too, traded with the enemy. A Justice Department prosecutor said he should have been prosecuted as a war criminal. He was known as “Hitler’s Banker in the U.S.”

Neil’s father George Herbert Walker Bush provided arms to the people we now call terrorists. In business (including the spy business), and later as a high government official, he provided arms for Osama bin Laden in bin Laden’s fight against the Russians in Afghanistan; Bush helped arm Saddam Hussein in his fight against Iran (providing, among other things, cultures for biological weapons). Among his business partners are several Middle Eastern billionaires including the bin Laden family.

Neil’s brother, George W., the 43^rd  President, got his start in the oil business with an investment from Osama bin Laden’s brother-in-law, Khalid bin Mahfouz.

Marvin Bush has sold electric fencing to Kuwait. Companies owned by Marvin (and/or their subsidiaries) have had hundreds of millions of dollars worth of U.S. Government contracts with the Navy, Army, Defense Department, and Departments of Commerce, Treasury, and Agriculture. At least $327-million of Marvin’s contracts were rescinded, however, when Marvin’s companies were unable to perform.

One of Marvin’s companies provided electronic security for the World Trade Center.

Another of Marvin’s companies, Erinys International, paid $2-million to Ahmed Chalabi, the American-appointed head of the Iraqi National Congress. Chalabi was the man who convinced the Bush Administration that Iraqis would throw flowers at the feet of the invading American Army.

One of Marvin’s partners, Michael Brahan, was also a business partner of Paul Bremer, the head of the Coalition Provisional Authority, who handed out the no-bid contracts in Iraq.

With access to inside knowledge from special interests in Saudi Arabia… Bahrain… Kuwait… Abu Dhabi… Iraq… Nigeria… Argentina… China… the U.S…. and elsewhere…

…and with well-connected Republican money men always willing to buy them out when profits falter or when one of their schemes becomes too public, the Bush brothers have done quite well for themselves. “The Merchant of Death,” “The Financier of Auschwitz,” and “The Unindicted War Criminal” would be proud of how the boys have carried on the family tradition.

—

“Every great family has its scandal. The Bush family’s scandal is that they funded Hitler and profited from the Holocaust.” –John Loftus, 2003, Justice Department War Crimes Prosecutor

“The Kennedys? Wait till I turn these Bush boys loose!” –George H.W. Bush, circa 1960′s

Vouchers for Veterans By PAUL KRUGMAN

You have to wonder about a Black Man married to a Black Woman and chasing all those White Women at work, LTR, Hit and Miss. This man was definitely hard working!

Ginger White Claims To Have Engaged In A 13 Year Long Affair With Herman Cain

On Monday afternoon news broke of an alleged consensual and long-term affair between GOP presidential candidate Herman Cain and an Atlanta area woman by the impossibly scripted name Ginger White. The story of national political import appears to be the work of local Atlanta Fox 5 reporter Dale Roberts, though it was preemptively broken live on CNN by Cain himself during a live interview with Wolf Blitzer. Little has been known about the actual story, until now.

The segment is just exactly what one might expect from a local news crew, though rarely does something so seemingly pedestrian earn such national attention. Among the details that emerged from the interview is the claim by Ms. White that she met Cain in the late 90s at an event in Kentucky. She also claimed that she after spending some time in the hotel room with the former CEO and restaurant executive, she was invited to meet in on a trip to Palm Springs, where the affair actually began.

Ms. White is an unemployed and single mother of two, struggling to make ends meet. She also has a history of making sexual harassment allegations in 2001, and has had a temporary protective order placed against her for repeated e-mails and texts threatening lawsuit and defamation of character as well. None of that is necessarily relevant to the story, but is certain to come up as Cain’s supporters look to clear the name of their candidate for what seems to be a pattern of allegations, none of which have yet to be absolutely proven to be true.

Perhaps the most interesting moment came when Ms. White showed her cell phone to the reporter, demonstrating that she had received some recent phone calls from Mr. Cain. When the reporter texted the number assigned to Cain, he claims to have spoken to the presidential candidate himself. During the previous interview with CNN, Cain admitted that he has known and considered this woman to be a friend for roughly 13 years, though he strongly denied any inappropriate affair.