Paulson reiterates that his firm neither structured nor marketed the ABACUS deal. Paulson only suggested securities that ACA could include in the portfolio; the final decision was up to ACA. Even though Paulson has not been charged in the case by the SEC, because the agency contends it was Goldman that misrepresented Paulson’s role in the ABACUS deal to prospective investors, the Paulson investor letter reads as a defense of the firm.
As I pointed out yesterday, Paulson makes some good points, the most persuasive of which, to me at least, is the fact that Paulson had been openly shorting RMBS for some time, believing strongly that the housing market was poised to tank. There were plenty of people willing to take the other side of that trade, in other words bet that the housing boom fueled by the cheap-oil orgy of the past 60 years would continue indefinitely.
Paulson was right; everyone on the other side of ABACUS and similar deals was wrong. I still don’t think the bursting of the housing bubble and the subsequent credit crisis was a zero-sum game from an investing standpoint, but Paulson’s windfall goes a long way toward evening out the “winner” side of the ledger.