[quote=CA renter]
IMHO, John Paulson entered late in the game, and was NOT the cause of any “crisis.” He saw that the crisis was coming, and looked for a way to make the most money from it. Not saying that what he did was ethical, just that the danger of things blowing up already existed before he entered his trades. I think he’s a scapegoat for those who won’t confess to the real problems…just like Lehman’s failure is being credited with “triggering the crisis.” Um, no. Lehman’s failure was a **RESULT** of the crisis. The crisis was happening between 2001-2007 (or thereabouts), when securities that were sure to blow up were being created and sold as “a way to spread risk around.” Yeah, it spread risk around alright…all around the globe, and it affected almost every single financial institution.[/quote]
I agree with you re: Lehman. But I’ve not argued otherwise.
Regarding Paulson/Magnetar/Et al… I did not say they “caused” the crisis. I said they “helped” to manufacture the crisis. That is, they exacerbated the crisis through their actions. Without Paulson/Magnetar, many billions of mortgages would not have been underwritten toward the tail end of the bubble. They exploited a flaw in the analytics of the ratings agencies and cherry-picked the shittiest of loans for their long vehicle, where they were betting only 10 cents, so that they could short that very vehicle via CDSs and earn $1. They created a flawed, leveraged long investment destined to fail so that they could short it and earn back the loss 10x over. Now, should the other investors and ratings agencies caught on to this silliness? Of course. And on a small level one might view something like this as innocuous gamesmanship. But when many billions of mortgages are involved, it’s just plain wrong, in my view. Again, no one’s blaming Paulson/Magnetar/Et al alone for the crisis. But not to see that they played a significant role in exacerbating the bubble when it could very well have started winding down (with less damage) otherwise is to either not understand what they were doing or to be naive in the extreme.
