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Editor’s Note: Each week we cross-post an excerpt from Katrina vanden Heuvel’s column at the WashingtonPost.com. Read the full text of Katrina’s column here. Ad Policy

There’s a scene in the HBO adaptation of Andrew Ross Sorkin’s book “Too Big to Fail” where Treasury Secretary Henry Paulson’s adviser suggests he call Warren Buffett to ask for help with Lehman Brothers. “As what?” responds Paulson. “Warren’s friend? His former banker? The treasury secretary? No!” In the movie, Paulson understands the difference, that there are bright lines that he should not cross. In real life, it turns out, these were not the kind of distinctions Paulson was particularly concerned about making.

Missing from that movie—and other first drafts of recent financial history—was a bombshell recently uncovered by Bloomberg’s Richard Teitelbaum: Paulson gave his hedge fund friends inside information about government plans to seize Fannie Mae and Freddie Mac, seven weeks before it happened. Common stock and some preferred stock would be wiped out in the process, he told them, meaning a bet against the giants was a bet that could make them millions. Those without connections to Paulson didn’t get a tip-off; worse, they got the opposite. On the same day that Paulson met with the hedge funds, he told the New York Times that markets would soon have reason for renewed confidence in both enterprises.

Such shameful conduct, which law professors told Bloomberg is not illegal, is becoming increasingly typical. We know, for example, that Paulson held a secret meeting with the Goldman Sachs board in a Moscow hotel in June 2008 that, again, didn’t match his public statements. These are just the meetings we know about.

“You just never ever do that as a government regulator—transmit nonpublic market information to market participants,” William Black, a former general counsel at the Federal Home Loan Bank of San Francisco, told Bloomberg Markets Magazine. But Americans have learned by now: Never say “never ever.”

We also recently learned the details of the Federal Reserve’s $7.77 trillion bank bailout, which the banks that benefited and the Fed have spent years trying to keep secret. It turns out that trillions of dollars were lent to faltering banks at rates far below market value, allowing those institutions to turn a combined $13 billion profit on the deal. “This was perhaps the single most massive allocation of capital from public to private hands in our history,” wrote former New York governor and attorney general Eliot Spitzer, “and nobody was told.”

Editor’s Note: Read the full text of Katrina’s column here.