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In the public media, John Paulson is the genius who smacked a massive home run betting against subprime mortgages before the market crash. But isn’t Paulson really more like a casino dealer who actively arranged the deck before dealing out the cards? Seems Paulson’s home run ball has “steroids” written all over it.
According to today’s SEC charges against Goldman Sachs (GS), “The SEC alleges that one of the world’s largest hedge funds, Paulson & Co., paid Goldman Sachs to structure a transaction in which Paulson & Co. could take short positions against mortgage securities chosen by Paulson & Co. based on a belief that the securities would experience credit events.”
Fair enough. But when these same securities where peddled to Goldman clients to buy as long positions, Paulson and Goldman were purposely dealing these investors a poker hand comprised of garbage while Paulson took out side bets the hands dealt were worthless.
At the moment, the SEC says Paulson is not being charged. However, once the blood lust of the screwed investors and general public starts seething, the junior attorneys at the SEC will be looking long and hard at how to squeeze Paulson into a “criminal” category.
Like the MLB season, this story is just getting started …
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