David Sims'  Instablog

(click to enlarge)Back in 2008, then-Treasury Secretary Henry Paulson was attending the Olympic games in Beijing. According to Secretary Paulson's book, On The Brink, while attending the games, he learned about an elaborate scheme to disrupt the U.S. financial markets. The Chinese authorities reported that Russia had urged them to dump Fannie Mae and Freddie Mac bonds onto the open market in an attempt to cause a panic.

Before that time, we also know that in June 2008, the Treasury Secretary met with some of his former colleagues at Goldman Sachs in a Moscow hotel suite. He told them about the impending failure at Lehman Brothers.

And then in July 2008, Paulson met with hedge fund managers at Eton Park Capital. He told them about the possible plans for Fannie Mae and Freddie Mac. All the while, the Treasury told the press and shareholders that there was nothing to fear.

If you connect the dots, you may conclude that the Treasury Secretary, his staff, or his buddies at Goldman Sachs were ultimately responsible for one of the biggest failures in economic secrecy. Loose lips apparently destroy financial markets. Somehow, Russian intelligence must have acquired the knowledge necessary to know that the house of cards was about to collapse. With that knowledge, the Russians could have waged economic warfare.