Tags: john | paulson | subprime | fund

Paulson's Hedge Fund Made Billions on Subprime Crisis

Monday, 19 Apr 2010 09:30 AM

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink
Hedge fund manager John Paulson’s company reportedly made billions shorting the subprime mortgages packaged and sold by Goldman Sachs — which is now facing fraud charges by the Securities and Exchange Commission.

Paulson began betting against subprime mortgages as early as 2006, setting up two funds focused for that purpose.

At the time, the bet seemed highly contrarian: Big firms like Merrill Lynch and Citigroup were gorging on enormous profits by packaging and trading blocks of risky home loans, The New York Times reports.

According to The Wall Street Journal, two of the points of contention in the SEC's securities fraud charges against the investment bank are whether Goldman misrepresented Paulson's investment objectives, and the extent of Paulson's role in selecting the securities that went into the mortgage-backed product Goldman marketed and sold to investors.

Goldman, the SEC complaint says, "misled ACA into believing that Paulson was investing in the equity of ABACUS 2007-ACI and therefore shared a long interest with CDO investors."

The complaint also alleges that Paulson "heavily influenced the selection of the portfolio" for the CDO. However, Paulson, who isn't charged in the case, said in a statement that portfolio selection agent ACA Management LLC "had sole authority over the selection of all collateral in the CDO."

Those securities were later rated AAA by credit rating agencies.

"Paulson has never misrepresented our positions to any counterparties," the company’s statement said, adding that "the vast majority of people in the market thought we were dead wrong."

© 2014 Moneynews. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Retype Email:
Country
Zip Code:
Privacy: We never share your email.
 
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
Top Stories
You May Also Like

South Carolina Political Campaign Goes to the Dogs

Monday, 01 Sep 2014 15:53 PM

In some ways, political campaigning has gone to the dogs in South Carolina.Boots McMaster, a bulldog with no chance of b . . .

Obama Promotes Surging Economy as Midterm Elections Near

Monday, 01 Sep 2014 13:46 PM

Boosted by recent economic gains, President Barack Obama is sounding more bullish about the nation's recovery from the G . . .

Bobby Jindal: I Will Decide in 2015 Whether to Run for President

Monday, 01 Sep 2014 11:57 AM

Louisiana Gov. Bobby Jindal says that he is "thinking" and "praying" about whether or not he will run for president in 2 . . .

Most Commented

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved