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|User Info||Cramer Needs To Shut The Hell Up; entered at 2010-04-16 16:25:34|
Registered: 2008-01-20 Northern CA
I'm a little unclear how this alleged fraud by GS differs from a simple put, except in one and only respect: The buyer of a put (in most cases) expects the underlying to "decline". Not necessarily go to zero, just decline. |
Now I realize that Paulson & Co. expected these particular "underlyings" (the trash morts he wanted to bet against) to decline, and, maybe, we don't know yet, for these particular items to decline sufficiently so that a default would be triggered. So far so good. Just like an equity put, but with this "threshold" or "overlimit" element and thus his ability to profit therefrom engaged. Still, so far, so good.
What is the allegation here, that Paulson not only wanted to bet against these morts (= fine, as far as I'm concerned) but wanted to further bet against the ability of the insurers to pay up? That doesn't seem logically coherenet. If the insurers could not pay off, then how was he supposed to collect his bet?
Now I know the charge isn't against Paulson, nor do I think he has any culpability. It's against GS. I guess I am not clear how GS was not simply acting as a market maker, selling the put that Paulson wanted to buy.