Wednesday, April 21, 2010

Paulson Screams Not Guilty

John Paulson screams not guilty in the latest fiasco with Goldman Sachs (GS). Well what else was he going to say?

In law there is the concept of “guiding mind”.

The guiding mind orchestrates and constructs the alleged malfeasance. Given that he has made billions on an idea that he generated; given that other i-banks turned him down and Goldman Sachs went for it, strengthens his role as the guiding mind. He did pound the pavements looking for the correct partner in this one.

Legally Paulson wants to shake this one off. Economically if you believe in creative destruction and the value of short sellers in capital markets you have to thank Paulson for declaring “Emperor wears no clothes” Paulson did the job the SEC failed to do. He regulated the market and took his bounty.

Of course he cannot argue the point in this fashion. The system is on trial.

Disclosure: No position in this stock or with Paulson & Company