I had no intention of creating a firestorm when I put a small sidebar in my most recent Slate article on Brazil. I had been told by several investment industry sources that Quantum Fund had bought heavily just before the appointment of Fraga, and that there were many suspicions about whether Quantum had had inside information. I was also told that such stories were being told to proper journalists, so I expected that they would be common knowledge by the time my Slate piece was published.
I know of nothing to suggest that Fraga himself is corrupt, and knowing him slightly do not believe that he is. I would be delighted to hear that he did not even tell Soros about the pending appointment, so that Quantum had no inside information. What I suspect - but only suspect - is that what Fraga actually did was simply to tell his employer that negotiations were in progress, and that this information alone indicated that the wild rumors about Brazil were unfounded. In that case he was careless but not venal. Quantum should have stayed out of the market, but by all accounts did not.
Let me repeat: my aside - and it was no more than that - was simply an attempt to help explain to Slate readers how the world works. I thought the story would be old news, known to everyone who matters, long before Slate published it. It still seems to me incredible that nobody else in the media drew the connection between Quantum's market actions and the timing of the appointment.
I think the lesson of this incident is simply how dangerous, financially
and ethically, it is for governments to be drawing for expertise on the
very same organizations that speculate in their debts. But I do not regard
it as a reason to turn on Fraga now that he is no longer a Quantum employee.
I wish him the best of luck.