Yesterday, federal judge Jed Rakoff slammed the Securities and Exchange Commission for making a toothless settlement with Citigroup over financial crisis misdeeds, arguing that it obscured the basic facts of what actually happened. Today, Bloomberg Markets Magazine has an important story by Richard Teitelbaum that, from a very different vantage point, demonstrates the same infuriating point: Despite the economic wreckage we are still trying to repair, we have yet to have an adequate accounting of how the financial crisis happened, what caused it, and who knew what when.

According to the story, on July 21, 2008, then-Secretary of the Treasury Hank Paulson met with “a dozen or so hedge- fund managers and other Wall Street executives” and discussed “a possible scenario for placing Fannie [Mae] and Freddie [Mac] into ‘conservatorship.’” That’s a fancy term for a government seizure that would have allowed the entities to keep operating, but would have caused severe adverse consequences to holders of the Frannies’ equity and, possibly, debt. A fund manager told Bloomberg 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.” After the meeting, this manager consulted a lawyer, who told him to cease trading immediately in the Frannies, lest he later be accused of – here’s the rub – insider trading.

The Bloomberg story cites law professors to say that Paulson did not break the law. But the story’s implicit allegation is that the former head of Goldman Sachs was so clueless – or contemptuous – of his role as Secretary of the Treasury of the United States of America that he engaged in a clubby tête-à-tête with his former peers and handed them what Bloomberg says “amounted to inside information.”

It’s actually worse, because as Bloomberg also reports, Paulson was publicly playing down the possibility of dramatic government action -- practically the opposite of what he confided behind closed doors to those elite traders.

Paulson didn’t comment for the Bloomberg story, and his spokesperson referred questions to his book, On the Brink: Inside the Race to Stop the Collapse of the Global Financial System – which, Bloomberg points out, doesn’t mention the meeting.

There are limits to what a reporter can get – starting with whether any of those powerful and canny Wall Street sharks profited on the information. They may have shorted the Frannies, but, as the Bloomberg story points out, "tracking firm-specific short stock sales isn’t possible using public documents." We need a more powerful entity -- perhaps a Congressional committee? --to find that out. And, here are a few more questions that cry out for answers:

1. What is the justification for such a meeting? Former St. Louis Federal Reserve bank president William Poole suggests that the Treasury needs to be able to prep the market with information.

Fair enough. A Treasury Secretary should talk to smart market participants, and needs to know how the market might react to any given action.

But there’s a difference between meeting to receive information and telling a chosen few market-moving plans. Hank Paulson and now Timothy Geithner should receive information from all types of parties. If they want to float a trial balloon, they have to float it in such a way that doesn’t give select participants market sensitive information.

2. Why did Paulson meet with these people specifically? The Bloomberg piece notes that Eric Mindich, a hedge fund manager who is a former Goldman Sachs employee, hosted the meeting. Several Goldman Sachs executives attended.

If the Treasury secretary is going to hold meetings with market participants, the attendees should be chosen based on – you are going to laugh here – merit, not connections. And they should be transparently disclosed at the time.

3. How many other meetings like this were there? As Felix Salmon recalls, Andrew Ross Sorkin in his book “Too Big To Fail” revealed that Paulson met with the board of Goldman Sachs in June 2008 in Moscow -- a month before the meeting Bloomberg has revealed -- and discussed market conditions, and even contemplated that Lehman Brothers might fail.

Here’s how Sorkin wrote about this:

“For the nearly two years that Paulson had been Treasury secretary he had not met privately with the board of any company, except for briefly dropping by a cocktail party that Larry Fink's BlackRock was holding for its directors at the Emirates Palace Hotel in Abu Dhabi in June. Anxious about the prospect of such a meeting, [Paulson Chief of Staff Jim] Wilkinson called to get approval from Treasury's general counsel. Bob Hoyt, who wasn't enamored of the "optics" of such a meeting, said that as long as it remained a "social event," it wouldn't run afoul of the ethics guidelines. Still, Wilkinson had told Rogers, "Let's keep this quiet," as the two coordinated the details. They agreed that Goldman's directors would join him in his hotel suite following their dinner with Gorbachev. Paulson would not record the "social event" on his official calendar.” END OFFSET

One possible defense for Paulson floating government conservatorship of Fannie and Freddie is that by the time of his July meeting with traders and executives, the market was widely anticipating the government would take that action. But what if the market only anticipated this because there were other, previous meetings between Treasury officials and well-connected investors in which such plans were floated?

4. What did this meeting do for the Treasury?

My sense of Paulson’s approach – act first, act boldly, move on and dwell no more – is that his actions weren’t well thought out at all.

But let’s concede, arguendo, that Paulson and the Treasury held this meeting as part of a carefully thought-out strategy to prep the market for the Frannie conservatorship. What did that get the government? If anything, the prepping only would make the investors more likely to extrapolate and short or sell other financial stocks.

If preparation was indeed the rationale and justification, then Paulson and Treasury needed to have a contingency plan for investor reaction. Which they almost certainly didn’t, since Lehman then failed and they were forced into a series of desperate actions. Over the next weeks, they scrambled to create the Troubled Asset Relief Program, or TARP, and then remake it into the preferred equity-buying program (rather than the toxic asset purchasing program).

Without a full and convincing accounting, we are left with a picture of a Treasury Secretary who took care of his buddies while allowing the system to blow up. This is the kind of thing that a crony capitalist system – and only such a corrupt system – would allow.