Following allegations of fraud
at Goldman Sachs, hedge fund manager
John Paulson--who was allegedly involved in assembling the Abacus fund, though he hasn't been accused of any wrongdoing--is scrambling
to reassure investors he won't be battered by the SEC's suit. Some of his clients, however, aren't so
sure. On Monday, Paulson held a conference call with about 100
investors. They raised doubts about Paulson's ability to lead
the massive fund and avoid legal troubles. Should Paulson be worried?
- Yes: You Can't Go After Goldman Without Nailing Paulson, insists Andrew McCarthy at National
Review: "If you want to talk material omissions, to charge Goldman but
not charge Paulson is pretty darn material. If what Goldman was selling
was fraudulent, it can only be because what Paulson manufactured for
sale was fraudulent. The two were in cahoots. If what Paulson did was
perfectly lawful, Goldman can't be legally culpable for helping him do
- He's Also Got a Major PR Problem, writes Ira Stoll, editor of The Future of
Capitalism: "The next phase of the anti-Goldman backlash is going to
feature Congress or the press parading before the cameras real people
who lost their homes when they defaulted on the mortgages that were at
issue in the bet that Mr. Paulson asked Goldman to structure for him in
the trade that is the focus of the SEC charges."
- No: Paulson
Should Breathe Easy, writes Sebastian Mallaby at The
Washington Post: "This is a non-scandal. The securities in question,
so-called synthetic collateralized debt obligations, cannot exist unless
somebody is betting that they will lose value. The firms that bought
Goldman's securities knew perfectly well that some other investor must
be taking the opposite position. It was their job to evaluate the
Goldman offer and make up their own minds. One of the big losers in the
deal was IKB, a German bank with a big business in mortgages. We're not
talking mom and pop."
- Paulson Isn't the Villain, Magnetar Is, writes
Felix Salmon at Reuters. He's
referring to the hedge fund Magnetar Capital which also shorted
mortgages: "From a systemic perspective, Magnetar had a much bigger
effect — and a much worse effect — than Paulson... Magnetar was in many
ways the engine which was responsible for many of the worst losses from
New York to Dusseldorf. Those losses didn’t directly become Magnetar
profits, because Magnetar was long equity and generally hedged in a way
that Paulson and Burry weren’t. But they did end up helping to cause the
biggest recession in living memory."
- Exit Question James Stewart at The Wall Street
Journal wonders: "Though Mr. Paulson hasn't been accused of any
wrongdoing, it would be interesting to know how much money from the
Troubled Asset Relief Program paid to Amercan
International Group, Goldman and others ended up going to him."
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