Opinion: TheTalented Mr. Paulson's Clever Exit

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The sickening feeling of the average investor and taxpayer being "had" by the economic crisis continues, and continues to come from disappointing quarters.

My latest jolt came from a throwaway line from exiting Treasury Secretary Henry Paulson in an interview with Maria Bartiromo that aired on CNBC this week. Paulson recalled that he voiced serious concern about financial markets in his first meeting as Treasury Secretary with President Bush and his team back in August 2006. He said something to the effect to Maria that he told President Bush that it had been years since the last financial crisis, and that he thought both he and Bush would likely be in office when the next crisis came given various concerns he laid out in the August 2006 meeting.

I was taken back by his timeline. Here's why:

I recall joking with a friend back in July 2006 that the fact Paulson was forced to sell his $500 million+ stake in Goldman Sachs (GS) to prevent conflict of interest in his upcoming cabinet appointment was probably his best trade ever. This friend and I had lamented the growing financial imbalances since 2003, and we were somewhat perplexed that they still didn't seem to matter back then. If any Wall Street titan were similarly concerned, we sneered about Paulson's "forced" sale, being given such wonderful cover to exit his large financial position would be a relief.

Adding to Paulson's excellently profitable government adventure was the fact that he was exempt from paying tax on the sale. This was as per a federal regulation that waives taxes on forced sales by incoming government officials so that they won't be discouraged from taking on the burden of altruistic service to the public. That makes sense. But in Paulson's case, this convenient incentive was estimated to be worth an astounding $200 million.