have been john paulson. it shouldn't have been these investors that i write about who made the billions and figured it out and anticipated this collapse. the investors who should have been the ones i was writing about the included people like george, bet against the british pound at a time. that had been the greatest that ever until john paulson and the investors i write about. they should have got to stay, he didn't warren buffett odyssey, greatest investor of our century, the passenger or so. he could have done and didn't do. mike is an expert in mortgage-backed securities and that's what john paulson threw himself into learning about and analyzing and betting against. am gym is the most famous short sell out their, and this trade is a short sell, a betting against. david tepper was someone i wrote about more recently who made $7 billion last year, and he is known for his deep traits, big bets. he doesn't care if they go up or down. very volatile. he didn't do anything. he was told about this trade. includ

john paulson and others. but behind it all what propels it all is a conundrum that it shouldn't have been john paulson. it shouldn't have been these investors that i write about. who made the billions and figured it out and anticipated this collapse. the investors who should have been the ones i was writing about included people george soros who bet against the british pound and at the time was the greatest trade ever until john paulson and the other investors i wrote about. warren buffett, you know, the greatest investor of the century, of the past century or so. he could have done it. he didn't do it. mike veranos is an expert on securities and that's what john paulson threw himself in analyzing and betting against and mike didn't do this trade. and jim chanos is the most famous short seller out here. this trade is a short seller and jim didn't do this trade. david tepper who's someone i wrote about more recently he made $7 billion last year and he's known for his big trades, big bets. he doesn't care if th

financial crisis who profited the most, john paulson, made millions of dollars by betting against subprime before anyone else realized or was smart enough to do it. he went to goldman sachs and created subprime mortgages. what goldman helped him do was go out and find other side to that. that's what goldman sachs and other investment banks do, find buyers and sellers. what happened and was wrong was that goldman not only disclose to the buyers, but they were working with john paulson. he helped pick what mortgages were going in, but also led the b buyer to believe that he thought the mortgages would go up, not down. that is where the real issue is and where this complaint comes from. it was a billion dollars. a german bank that lost a billion. there was a guy listed,

portfolio of what turned out the to be toxic mortgages hand picked by a hedge fund manager run by john paulson. and the s.e.c. says that goldman did not disclose that paulson not only had picked the mortgages, but that he was betting against those mortgages in 2007 as the housing market was about to come undone. goldman sachs today says it will vigorously fight the charges and work to restore its reputation, a reputation that today is very much under fire. here is the s.e.c. chief of enforcement speaking today in new orleans. >> there is a fundamental difference between somebody being short on a synthetic cdings o or taking a view that the assets will perform poorly and a world of difference between thoo and letting that person being involved in the selection process of the portfolio. >> that person being john paulson of john paulson and company, the big hedge fund company and more to the point, the concern is that investors were not made aware of that and it is a disclosure issue. it is securities fraud. also charged here in this case is fabres teuri is quoted in an e-mail saying that the bui

that's goldman's single biggest defense in not mentioning hedge fund manager john paulson's name. however, i'm looking at this and saying with all the these negotiations and backing and forthing, they got rid of happen of them and worked with paulson. it's quite clear that mr. john paulson played a very key role in the portfolio selection process. to me that is undeniable. that raises the question whether goldman's decision not to disclose mr. paulson's involvement was a correct judgment or was it a material omission as one lawyer put it to me today? let me make a second point. -- in order to provide higher yield. all right? this troubles me enormously. creating something that's designed to fail. you know what? if it's not legal, it appears to me to be unethical and i must blame goldman sachs for this. why sell it to customers if it's going to fail? why go there in the first place? now, there's nothing wrong with creating a neutral security that will have buyers and sellers. that's free market capitalism, and the buyers and sellers do not have to know who they were. but if in fact

allowing john paulson to select securities.hey're denying it, i'm saying even if he did that, isn't the whole point i have this bet, find somebody to get against me. >> those on one side of the bet knows the other side of the betebet disagrees them. but goldman misrepresented how they put together the product, and that is the predicate for finding them libel. >> that's the crux of the issue. >> the crux is is it material that goldman, when it pretended to neutrality in creating product, which is how it presented itself to its clients, was designing something designed to fail. you're correct that one can imagine a situation where i know you think it's going to go south, i think it will go north. we sell at an agree eagreed-upo, no problem. but if it changes, that's a problem. >> in 2007 if you knew that john paulson was on the other side of a bet from you, you would quiver, john paulson was a mid level hedge fund manager who had been wrong before. >> goldman's defense was people taking the long side of this thought the other sid

john paulson paying them a fee? aca, another party involved.e center of this. financial institutions are doing so much for so many different people. they're too complicated, too complex and there's no clarity about who they owe that duty to. >> let me ask you this, as a politician, a former politician, at least, you mentioned chairman chris dodd, banking committee chairman saying today -- and here are his exact words -- that failure to enact his financial overhaul bill would leave the american public vulnerable to shenanigans in goldman sachs and other large firm? if you google this -- politico did story on this. what pops up? barackobama.com. democrats are using this to raise money. does it bother you they're using this to make political hay -- >> everything you do is going to be for political purposes. i spent years pursuing wall street, taking some real hits for people who disagreed with us. people always imputed you would tier carry motives. you just have to disregard that. i'm not worried about the motives. people will impute them to every

scott cohn reporting this morning on john paulson's first comments since charges were filed against his trade with goldman sachs. he obviously was not a part of the charges, but he's going on the offense. and steve liesman just broke a big story on the charges against goldman. so, let's start with you, steve. >> erin, thanks very much. cnbc has learned that the government has testimony from a former top paulson official appearing to contradict a part of its own case, specifically, cnbc has reviewed documents that questions the government's contention in its case against goldman sachs that the wall street firm misled the insurance company aca about paulson & company's intentions to short the deal. the government's complaint reads "unbeknownst to aca at the time, paulson intended to effectively short the rmbs portfolio it helped select." however, cnbc has learned that a top paulson official, paolo pellegrini, told executives that they intended to short the portfolio. they asked him about a meeting with laura schwartz -- "did you tell her that you were

john paulson, let's talk about him. he picked the toxic mortgages then bet against them. 's the lowdown on him. according to the "wall street journal," his firm paulson and company made $15 billion betting against the housing market in 2007, of which paulson personally got $4 billion. he made slightly more than $1 billion on the goldman deal. but despite being named in the lawsuit neither he nor his fund are defendants. officials say there's simply no basis for any charges. so tonight, what really happened at goldman? is the scandal real? or is the real scandal, like so many others in washington and wall street, perfectly legal? is this an exception or par for the course? is there something fishy about the timing of the lawsuit? just as the white house is pushing for greater regulation on wall street. joining us now, michael lewis, he's got three books on the "new york times" best seller list. including number one, "the big short." which lays out how the economy crashed. who was responsible, who saw it, who saw it coming and made a fortune off it. so michael, you read paul

the question is, does that bother you and could john paulson and the f.c.c. say if the if you'd only told me warren buffett put this stuff together..." >> it's an interesting question. i agree with you. it's an interesting question. it bothers me a little bit but... >> i think the larger issue that this case has exposed that this really is just about trading. when you think of a synthetic c.d.o., so many of these instruments on wall street, it's just another a casino. there's no underlying assets. they don't own these mortgages. people aren't getting mortgages because of this. what's happening is... people are literally betting on the price and that's it. and what is the social utility of that in an environment where the taxpayers have had to take on a huge burden because of these trades, what should be the policy as a result? >> and there certainly ought to be tollsy issues like that addressed, in the beginning as you know there were some state gaming commissions that wanted to prohibit this or regulate it on the grounds it was gambling. and what you had is

john paulson doesn't get bailed out by the government when he fames.s the difference. >> i was going to say. we don't give $4 trillion to a guy who bets on the diamondbacks to beat the dodgers. that's not the way it works. the problem, these guys have been massively subsidized by the taxpayer and doing completely socially non-beneficial trades. that's why people have to pay attention to this stuff. >> all right. thank you so much. fascinating conversation. this is not the end of the golden story by any sort of the imagination. we'll talk about it next week. we'll meet fabulous fab, the trader at the heart of it aunchts the moral of the story, don't send e-mails, and if you do, don't call yourself fabulous fab. >> oh, man. a total financial meltdown leaving millions struggling for jobs trying to repair destroyed nest eggs. next what must be done to assure another crisis is averted before it's too late. [ sneezes ] ♪ music plays ♪ [ sneezing ] ♪ ♪ [ male announcer ] what are you gonna miss when you have an allergy attack? benadryl® is more effective than

s fraud case against goldman sachs, kolchinsky said he didn't know hedge fund manager john paulson was betting against it. >> that's something i personally would have wanted to know. it changes the incentives in the structure. >> reporter: the ratings agencies' own incentives came under sharp criticism today. since wall street bankers pay for credit ratings, they often shop for a favorable opinion. former moody's executive richard michalek says analysts got the message quickly: being too tough would put year-end bonuses in doubt. >> clearly, if for any reason you were stopping a deal or delaying a deal or creating an issue with the relationship with the banker and moody's, that was a problem. moody's c.e.o. raymond mcdaniel says investment bankers never want a tough rating that hurts a deal. but while he pays attention to market share, mcdaniel says he always puts ratings quality first. >> those are risks and they must be managed properly so the ratings system is not compromised in any way. >> reporter: the credit rating agencies are supposed to be the referee on the field and senator

we like banks that wouldn't know john paulson from pat paulsen or ikb from the kgb. we are enamored of financial institutions that think derivatives are about whether the words derive from anglo-saxon or latin roots. we like bankers who when they hear the term "synthetic" wonder if that means the shirt's 50% poly and 50% cotton and how it will hold up under many washings. that's why we're not going to be looking back like lot's wife did and risk turning ourselves into a pillar of salt and instead we're going to rake in the benjamins. by finding the next huntington banc shares, which just today reported a fabulous -- yes indeed, to use the cliche term -- blue out manster quarter. sure we still like citigroup very much. we liked it at $3.15. and i'm going to see him at the white house correspondents dinner. but i'll just give him a little heads up now. memo to treasury secretary tim geithner let me trade this one to citigroup cramerican style. i think you should hold the 30% stake in citi until the stock hits $6.15, one of my preliminary targets, then at 6.15 what you

and by the way, peter, i have the john paulson of goldman sachs, aca hedge fund, s.e.c. fame, john paulson told his customers last night on their conference call that he sees a v-shaped recovery. he's probably watching the kudlow report. i don't know whether that's good orred ba. >> why would you ever believe anything john paulson said after the show that he played with goldman sachs. >> he looks smart. so what if he doesn't have any ethics? nonetheless, he made the right call on the mortgage bonds. howard ludnick says rates are going to hold these levels. do you agree? >> i do, but howard's missing something really big here, larry. he basically got lucky. it's the whole greece thing. it's the whole euro thing. you know the kudlow boom was pushing up the long end and everything like that. but what's happened now in this interval here is this great lack of confidence for the euro of flight to quality. here's dollars going up. the whole u.s. dollars to reserve currency is boosted, and basically it's been a boom for the bond market, and that's what's going on. i'm not sure

. >> we can't leave the goldman discussion without talking about john paulson. john paulson had a role allegedly in this whole thing by selecting the basket of securities at goldman sachs then marketed. so you've got to wonder about his own investments and sort of his ancillary impact in terms of his funds. and what we saw in the gold pits, we didn't see a flight to safety. you'd think with the market turning lower you'd see a flight to safety into gold. we did not see that action today. and in fact, if we take a look at some of these holdings, some of those individual gold stocks were down much more sharply than some of the broader measures. >> you wonder that if people now that have money with paulson say, you know what, we don't want to have any association -- >> just reputational. >> just reputational. you just wonder if that's the case. and you wonder if he has to liquidate positions. he is the largest holder of the gld out there. so you wonder what's going to happen with those. >> hedge fund investors have never been more gun-shy or jumpy and more risk ave

one of the people during the financial crisis who profited the most, john paulson, made millions of dollarsng against subprime before anyone else realized or was smart enough to do it. he went to goldman sachs and created subprime mortgages. what goldman helped him do was go out and find other side to that. that's what goldman sachs and other investment banks do, find buyers and sellers. what happened and was wrong was that goldman not only disclose to the buyers, but they were working with john paulson. he helped pick what mortgages were going in, but also led the b buyer to believe that he thought the mortgages would go up, not down. that is where the real issue is and where this complaint comes from. it was a billion dollars. a german bank that lost a billion. there was a guy listed, 31-year-old vice president, and he is at the center of all of this. so, some say this could be a game-changer. that this could mean other banks on wall street involved in structuring these deals, cdos, could be sued by the fcc. you can see more complaints like this. on the other side rk you have people who s

host: would it be act treat say that john paulson put the fix in? guest: well, i mean, he certainly did his research and figured out which of these bonds were going to tank. when you look at how this security performed, it was garbage. 99% of it, according to the s.e.c., 99% of the mortgage bonds had defaulted by john wary 2008. that was less than a year after it was created. host: the headline on the jump page of your article in this morning's "new york times," s.e.c. files fraud suit against goldman sachs. you write, the lawsuit could be a siphon a revitaled securities and exchange commission, which has been criticized for early missteps in assessing the causes of the financial crisis. the agency appears to be tracing the mortgage pipeline all the way from companies like countrywide financial that originated home loans to the trading floors that dominate wall street's profit machine. based on what's happening, the civil suit against goldman, what kind of changes do you see regarding the s.e.c. and how they enforce trading on wall street? guest: th

and john paulson-- run bay john paulson, a very prominent person in the hedge fund business on wall street? >> that's right. he made builds and billions of dollars personally by creating exotic techniques to bet against the housing market when everybody else was beting it would continue to rides. goldlman sachs helped him to do that. allegations on behalf of him they created the security that they then sold to investors who believed the housing market would continue to go up. and he benefited from this, although, the s.e.c. has clearly said today he didn't play a role in any kind of fraud leapt actions. so he thought-- he is not being charged or facing allegations of wrongdoing. it's goldlman sachs that is facing those allegations. >> lehrer: and the word there, of course, is that paulson saw the collapse coming and went with that bet on his own, and goldlman sachs just simply bought into that bet , correct, without tell telling people they were doing it? >> right. goldman was paid $15 to create this exotic financial instrument-- it's very complicated-- that paulson was able to use to bet

alleges goldman helped hedge fund manage john paulson win the bet by loading abacus with low-quality loans includings a high percentage of adjustable rate mortgage mord buyers with relatively low fico, or credit scores. yet, when those toxic loans were packaged and presented to investors they smelled more like french perfume. one big reason it's deal received the highest possible credit rating, stamped triple a., by the two top agencies, moody's and standard & poors, meaning it should have been a much safer investment. jack chen is a former moodees's analyst. >> investors, back in 2007, gave a lot of credence and had a lot of faith in the triple a. rating. >> reporter: the problem-- rating agencies are paid by the people who create the product, a conflict of interest akin to movie critics collecting checks from studios to review films. >> the truth is they are working for wall street ask they're going to give wall street what wall street wants. >> reporter: both moodies and standard & poors declined to comment on our story. the new financial reform bill will seek stronger regulation

as i understand this, billionaire john paulson, okay? who basically gets in bed with goldman sachs and says i'm going to go out and find the worst mortgages i can find. you're going to help me put this product together. i'm going to bet against it. ha ha. by the way other guys at goldman sachs go out and sell it to your customers while i'm shorting it. how do they explain that as anything other than fraud? the fact that paulson was putting this product together? >> i don't think he possibly can. >> aren't they saying every institution bets on both sides? >> in other words you've got a situation where people that were investing in pension funds, i mean, main street america gets hurt by this. if you had a pension fund invested in one of these vehicles you get hurt as a result. and at the end of the day, it's just not a fair playing field. i mean, if they're misrepresenting what they're selling, how can that be considered fair? and i'm capitalist. you're a capitalist, right? you need the system to work and you need rules and if they did wha

john paulson has been registering with the s.e.c. since something like 2004, and yet this still slipped their sights. >> yes. that's right. so there's voluntary registration. the new financial regulation -- financial regulations that are proposed talk about having mandatory registration. but what we need is we need a regular reporting of trades. we need hedge funds to go to the s.e.c. and say -- not that they have to be disclosed publicly, but there needs to be some sort of central clearinghouse at the s.e.c. that says this is what these hedge funds are doing. and if the s.e.c. had seen this, they might have seen all these trades coming and the bubble that was forming. the s.e.c. needs another early warning sign and hedge funds should be it. >> they don't have enough people, though. are you talking about every trade a hedge fund does? there's just no way the volume, can they can keep up with this. you talk about the registration. hedge funds were mandatory to register two years ago, and that got thrown out. and the real issue is not

bothers you that there wasn't the transparency -- they didn't tell the other side that it was john paulson who selected many of the securities. >> yeah. it's securities fraud if there is an -- if the seller of the product omits to state certain things that are very material. >> as far as whether or not this is the tip of the iceberg -- in other words, we don't know how many other wells notices are out there. we don't know how significant or steep the number of lawsuits will be for the entire industry. somebody saying just like you're saying, if they defrauded this person, they must have defrauded me. i want to sue because maybe i didn't get transparency. so there is a bit of a vacuum of information from an investment standpoint. we don't necessarily know the extent of this twb right? >> yeah. and it's unfortunate that just in this early stage of recovery, i think it's going to be a very limited one -- but it's unfortunate just in this delicate stage that we had another hit to the covenants that we have in the financial sector and, therefore, to our confidence about the strength of the reco

have duped clients in investing in a mortgage product, put together by another one its client, john paulson, was looking to profit when the product failed. >> what remains to be seen is whether senior people knew details how this was sold to investors. >> reporter: goldman sachs stepped up its defense, calling the firm's actions appropriate. but investors lost $1 billion. jeremy and vinita? >> t.j. winick in washington this morning. >>> another of goldman's defense is greg craig. craig was hired yesterday to assist with goldman's political moves. he used to be president obama's white house counsel. and he headed up former president clinton's impeachment defense. >>> why did a lone gunman go on a deadly shooting spree outside a hospital. one woman was killed in the attack. and two others wounded. then, the man turned the gun on himself and committed suicide. police say he doesn't appear to be related to any of the victims. >>> white house has announced that president obama will deliver the eulogy for those miners killed in the cold mine disaster. 29 miners died in the explosion, the worst mi

and other investors that hedge fund manager john paulson was preparing to bet against their deal, and that paulson would have a hand in shaping the security he was shorting. tourre denied the charge. >> i did mention to a.c.a. that paulson's expectation was that they were buying credit protection on senior tranches of that portfolio. >> that is the same thing as saying they are going to buy a short position, yes. >> reporter: in e-mails, tourre described himself as the fabulous fab standing in the middle of these "exotic trades." today he was more humble. >> i regret these e-mails, and they reflect bad on the firm and myself. i wish i hadn't sent those. >> other goldman executives also had a chance to regret the emails they sent or were forced to explain today. >> reporter: the role that the investment banks played in the financial crisis. has the hearing so far provided any answers to that? >> reporter: it confirmed a lot of what we know, first that this is a rough game and that investment banks play it to win. i think it also confirmed in some -- and some executive said this today -

john paulson, $2.3 billion, which makes the $41 million he paid for this estate in the hamptons a couple of years ago seem like chump change. at number five, stephen cohen, $1.4 billion. >> he is the quintessential living large hedge fund manager with his mansion in greenwich, his amazing art collection. >> reporter: a 35,000 square foot mansion, indoor pool, outdoor ice rink and extra garage for the zamboni. conspicuous consumption in a banner year for the heavyweight wall streets. lisa mayors, washington. >>> up next, it lived only 78 days. [ male announcer ] ready for the most amazing miracle-gro results ever? spectacular plants without all the weeds. with miracle-gro shake 'n feed plus weed preventer. just a few shakes stops weeds before they start. plants grow twice as big. with almost no weeds. even in your vegetable garden. want three months of feeding, without all the weeding? ♪ all you need... is shake 'n feed plus weed preventer. the one doctors recommend most for joint pain. more than the medicines in tylenol or aleve. the medicine in advil is the #1 doctor recommendation for

did you disclose to your customers there that john paulson was on the other side of this transaction that he helped put together? >> i didn't close -- i wasn't specifically involved, but i would tell you the disclosure documents would show what had been industry standards and what were material to that deal, which were the assets and how the deal worked. how the assets got in there, who was short it or long it other than goldman, because goldman was technically shorted into that deal, in making the investment decision, what people should focus on and was relevant to focus on were the assets and how the deal worked, not necessarily whose idea it was or various people who might have had input, because in the asset-backed business, the focus and what determines of outcome of those securities are the securities themselves and how the deal works. >> okay. let me ask this. do you believe that goldman's actions contributed to the financial downturn we experienced in 2008? >> um -- >> we had clients who lost money. that's not good for our clients, that's not good for us. but when you look at

john paulson of the time wasn't the john paulson we know now. >> that's the point. >> and it's very hard to tell whether that would have been material to a reasonable investor, which is the test the s.e.c. has to pass. >> if you were advising the firm, prepping for this hearing, what would be your goal, getting through today? >> well, there are two different things going on at once. >> understood. >> once the political animal and one's the lawsuit. i think they probably come out about the same place. i think they want to present their side of the lawsuit in a way that makes goldman sachs look less evil, if you will. and present them in a favorable light. >> there's some commentary out today that they have two options on this. they can either play dumb but good to their clients or -- >> meaning we lost money, too. >> right. or smart and sleazy, like we're smart but we didn't tell about you it. >> i think they're going to try to, i think, walk the tight rope between those two. and they certainly don't want to appear dumb, but they don't want to appear opposite their clients, as is quite cl

and that hedge fund manager, john paulson who installed those metaphorical brakes profited. the government says goldman's alleged fraud was in the lack of disclosure. >> investors were not told that somebody of opposite economic interest was involved in selecting the portfolio. >> reporter: in a march from the financial crisis not only unscathed but in a shiny new headquarters and record profits, but the firm denies the fraud charge, stating we did not structure a portfolio that was designed to lose money." during a recent hearing, goldman's chief signatured how the firm's legal defense may play out. >> these are the professional investors who want this exposure. of course, we have an obligation to fully disclose what an instrument is and to be honest in our dealings. but we are not managing somebody else's money. >> reporter: whether goldman was really at fault it puts the spot light on what many say continues to be a dysfunctional system. >> it sends a loud and clear message to the others that they're probably going to be next. if the s.e.c. is willing to take on goalman,

them to financial if i did, that over on the side it got help from a smart hedge fund manager, john paulson, who helped goldman create the package and after they were sold, he made bets the subprimes behind them would blow up. which they did. the banks, two of the banks involved in this, lost a billion dollars. the hedge fund guy made about a billion dollars. the sec says that the goldman should have disclosed the involvement of the huge fund guy. goldman says it didn't have to and it wasn't required under the law and that goldman gave them all the data, including all of the lists of the packages of the mortgages to analyze and could make a decision to buy or not based on the disclosure documents. >> the assumption is that the players are intimately knowledgeable about how these things work and that they can look at the disclosure documents and understand what's in them. >> reporter: and that is the basis of the sec's case, that had these sophisticated investors had this information about the participation. hedge fund guy they might have thought twice about getting involved. >> shepard: hav

you couldn't have a john paulson going to goldman sachs saying, design one like this for me, if that'sat happened. of course this is just an allegation. >> yeah, it is just an allegation. >> i think the broader point is, we had this system of disclosure that worked fine, set up in the 1930s, for registered securities and we've had these new instruments, derivatives, that were developed outside the framework of our existing disclosure system. so the big thing in this bill and the speech would say, hey, we need a new set of regulations to bring these new instruments inside the tents. >> but roger, in your op-ed, you make it even broader point that will not be addressed by this. because even if we put derivatives and make them transparent on a clearinghouse, you don't like the idea that wall street which was there to raise money for capital, for industry, it instead just plaiz placed bets on pieces of paper. it is nothing more than gambling. that's a really good point. elaborate, please. >> that's right. you don't see that in the bill. my point of that op-ed and the point i'd make now is

jim paulson, for those who don't follow this every single second, you are not john paulson, not the personho was involved in providing collateral -- >> i'm the lower pay grade paulson. >> now we have that out of the way, put your cards on the table. do you think this is something that's going to move the market more broadly beyond a day? >> well, it certainly could, but if it does, i guess, erin, i think it will be more, because the market was sort of at a point that was prepared for a correction. it had made a big run in the last 45 days. it broke through some big round numbers. there were people looking for a correction. i think this is an excuse to do it, but i don't think fundamentally much as changed as far as the central driving force behind what's been driving the market higher. jobs will still be created, profits will still be made. real gdp will still grow, and that stuff hasn't ended as far as where this issue goes. there is two things i like about this for a stock investor. one is that it certainly gave a positive sentiment and reduced it a little bit and reenstated a wall of wo

goldman did not tell the banks that a very savvy investment manager john paulson helped to create the securities and then turned around and made bets they would eventually blow up. which they did. it was financial car wreck. costing the banks more than a billion dollars. paulson's firm made about a billion. the government says if goldman had told the banks about paulson's involvement, they might have thought twice. >> the key was misrepresentation that would have called the buyer not buy security or considered it an important factor whether or not to purchase it. >> now some charge the administration weft after goldman in part for political reasons, to help win passage of the financial regulation reform bill in the senate, where some republicans threatened to filibuster the bill. the white house denies that. >> the s.e.c. is by law an independent agency. what it does, it does not coordinate with the white house. we receive no advance notice of any enforcement act. >> reporter: goldman denies the government charges and said it did not need to disclose paulson's role and it itself lost

john paulson of goldman sachs fame and cdo fame has had a conference call and he's trying to be on the offensive to reassure his investors that he is not going to take a negative consequences from this whole blow-up of the goldman sachs abacus fund and the s.e.c. fraud civil lawsuit. so paulson had a conference call late monday with about 100 of his investors. we are just learning the details. he's trying to persuade them that his actions in 2007 were fine and he would not be indicted tonight. he's probably saying we are not going to be indicted civilly or criminally. i don't know how he knows but his investors are asking the question. anyway, paulson trying to do some hand holding with his investors. the more i think about the s.e.c. lawsuit against goldman sachs, this thing is going to unravel in ways that none of us can possibly predict now. that's the point that i want to make. now, let's go to today's stock market headlines. apple had a blowout, 90% profit rise. mcintosh and the iphone sales. the s&p 500 climbed for the eighth time in nine days. it was up about 1%. the dow was up

i see a situation like this and i wonder how john paulson is making money on it. what do you think? what is the best trade here? >> i think probably long of gold and short of euros because gold, gold against the euro is all-time highs and continuing to get higher. i wouldn't want to be along the euros against any particular currency. even falling against sterling and that's a basket case in itself. so, you know, basically, as far as the euro zone is concerned, there is a distinct lack on loss of credibility. >> andy, can i ask, i'll ask another cliched question because melissa says what goes around keeps coming around for the recent months. the contagion effect. ireland looks better. ireland has made tough budget cuts but the southern european tier, i don't hear much going on there, italy, portugal, spain, plus greece. that would deep on the bank debt problem. >> there's no question contagion is a real problem but portugal announces they will reopen two issues. we have to wait and see how that goes. this really has been confined this week, in particular, to greece. greece and nothin

they were arranged by john paulson, a material fact that was not disclosed to the other buyers. and it was not disclosed to the other buyers that john paulson created this because he wanted to short them. because he wanted to bet against them. so, if there ever was a case of fraud, i would argue that that was a case of fraud. and yet goldman sachs says, our very first priority is clients come first. let's move over here to number 40. integrity and honesty are at the heart of our business. we expect our people to maintain high ethical standards in everything they do, both in their work for the firm and in their personal lives. well, there's one gentleman who has worked for goldman sachs that they refer to as the fabulous fab. he's a gentleman by the name of fabrice tory out of their office in london. well, i wouldn't suggest to you that mr. tory is fabulous. i would suggest to you that he's fraudulent. in some of the emails that the senate committee on investigations was able to collect, this is what mr. tory was saying. now, mr. tory is the individual who was selling these synth

> reporter: george soros, ranked t ranked one of the richest men is in the world. 2.5 billion, john paulsonllion, which makes the $41 million he paid for this estate in the hamptons a couple years ago seem like chunk change. at number 5, 1$1.4 billion. >> he is the quintessential living large hedge fund manager with his mansion in greenwich and amazing art collection. >> reporter: a 35,000 square foot mansion with an indoor pool, outdoor ice rink and extra garage for the zamboni. not long ago, he got permission to expand the house, in part, to add to his dressing room. as for his art, he recently snapped up an early version of jasper john's signature flag painting for an estimated $110 million. c conspicuous consumption in a banner year for the heavyweights of wall street. nbc news, washington. >>> for more, let me bring in laura flanders, author of "blue grit" and host of "grit tv." you are perfect for this interview, you tell it like it is. you are a strong liberal. what does this look like to main street and how do people put rhyme and reason to this? >> if only it wasn't so sad, you wou

at number four, a guy named john paulson made $2.3 billion this past year.est known for betting against subprime mortgages. well before people realized they were ticking time bombs. at number three, james simons, a mathematician, this guy got a ph.d. from uc berkeley at age 23. he made it by mathematics, i guess. the runner-up spot a familiar game, mr. george soros, he's still got $3.3 billion in hedge fund income last year. get these numbers, billion. so who earned the top money? >> a guy named david pepper with $4 billion, with nine zeros. he bet big in fall 2008 that the government would prop up wall street with taxpayer money. that was his bet. david pepper, the top hedge fund earner with $4 billion in income last year. not saying it's earned, but he's got it. i'm going to have to something to say about this kind of money in our so-called free enterprise system. which we nicely call free enterprise. >>> up next, get ready to be outraged, the father of a fallen marine who sued a vulgar, anti-gay church group that protested his son's funeral, he's been ord

wall street journal," and author of "the greatest trade ever," a book about hedge fund manager john paulson and his bet against the housing boom. roger lowenstein, that line from senator learn early on that we heard about the conduct of all wall street being in question, how much of this was about goldman, how much about a larger picture? what did you hear going on today? >> jim, i really think that leaven hit the nail on the head. it is a question about all of wall street. it's not whether goldman defrauded its customers so much. the courts will decide that. it's not even goldman's reputation which presumably in time will recover, but goldman, like other firms, structured tens of billions of securities that added absolutely nothing to the economy. they contributed nothing to real estate. them didn't put a single american in their homes... in new homes. they just allowed people to take bets. when the mortgage bubble collapsed, they greatly aggravated the losses and the damage done. these firms are running what were in fact casinos. they were off-track betting parlors for the american mortga

for the second time this week john paulson holding a conference call with investors over his involvementn the goldman sachs case in an effort to prevent investors from leaving. is this run on paul sons funds justified or is he just an innocent sfwander in all of this mess? here to answer that question, let's go back to anthony scaramucci, who's a managing partner at skybridge capital. anthony, first of all, i've got to ask you, of course, skybridge, fund of funds, is there any exposure to a paulson fund? >> no, we don't have any exposure. >> all right. what do you make of this? it does seem like he's trying to fend off redemptions. >> listen, i give the guy a lot of credit. this is sort of what goldman sachs should be doing. he's getting in front of his investors, open communication. he's trying to allay fears and suspicions. i think it's a brilliant strategy by him. and i do think it will stem some of the redemptions. people are fearful about his involvement in this goldman sachs case. and i think by speaking out and getting 234 front inting in fr he's going to dampen down some of the r

hedge fund giant john paulson, who was allegedly looking to profit when that product then failed.1 billion, while that hedge fund chief made $1 billion. in taking on goldman sachs, though, the s.e.c. is taking on wall street's giant. a bank with long, powerful tentacles. two recent treasury secretaries came from the bank. secretary robert rubin and secretary hank paulson. >> a lot of people out there are going to ask, with goldman is this just the first shoe to drop? >> regulators, the politicians, the public are out for scalps and goldman is the biggest scalp of all. >> reporter: goldman sachs knows that. over the weekend, a voice mail from goldman's ceo. the extensive media coverage on the s.e.c.'s complaint is certainly uncomfortable but given the anger directed at financial services, not completely surprising. inside the bank, a belief goldman is being made a scapegoat for the kind of product pushed by many of the big investment banks and there is concern over maintaining their most powerful commodity, their clients' trust. how many people within the bank truly knew about this

i spoke about on the floor of the senate previously over the last couple of years, a man named john paulson, who in 2008, was the highest income earner on wall street, $ $306 million, $10 million a day. how would you like to come home and the spouse says, how are you doing and he says, we're doing pretty good. $10 million every day. so my understanding of this, the s.e.c. complaint is that they setup a system where mr. paulson could short what i believe are naked credit default swaps and others took a long position and you had rating agencies rating these things apparently with high ratings until they discovered what they really were and the ratings collapsed, mr. paulson made a bunch of money and everybody else got duped out of their money. that's a short description and probably not even a very good description. but it's close enough to understand what's been going on in this country, betting. not investing, betting on credit default swaps, naked default swaps that have no insurance in anything. no value on either side. you put together a contract that says, i'm going to bet you that this

john paulson, the famous hedge fund manager who made all that money on subprime, when we were in thed all this research about the data that told them that when housing prices decline or housing prices increase by a small amount, foreclosures -- i mean, they had all this data about what went on when the market starts slowing down. they made an enormous amount of money on it. the bottom line is, let's look at 2008 for a minute. so many hedge funds liquidated. a lot of hedge funds also got in a lot of trouble because of the bets they had to make. they closed shop. you couldn't get your money out. there is a mixed story within the hedge fund world. you can't say all these guys are geniuses but this is what they did and they did it obviously well last year. >> quite well. who needs an ice rink and a zamboni? >> who's to judge how you're spending your money. >> it's ridiculous. >> it's a free market system. >> free market, okay. it just seems a little silly, doesn't it? >>> time to unveil this week's issue of "time" magazine, the new cover. joining us the deputy manager of "time," michael