Profits of Greed

Am in Mumbai, India’s financial capital, when my eyes chanced upon Michael Lewis’ Bloomberg column in Mint about John Paulson, the Wall Street player who made $3bn betting that lending to US homeowners was a bubble that was going to go pop.

Lewis gave up a life on the trading floor for one behind the keyboard and knows a thing or two about the new rich. He’s pin point in identifying Paulson as the “truly satisfying villain” of the current bloodbath on Wall St. “All sorts of people are being sued, but most of them lost money, just like the victims. The first rule of financial villany is that the villain must have made off with a pile of loot”.

Paulson has made billions, garnering fame on the way. In the Wall Street Journal, Mr Paulson appears all too glad to say how easy it had all been as millions of Americans struggle to keep their homes. "I've never been involved in a trade with such unlimited upside," Paulson, 52, told the Journal. "Mortgage experts were too caught up" in their own happy talk, he added.

Although Paulson appears to be the epitome of the American Dream, having become a billionaire from humble roots in Queens, he has succeeded by undermining the foundation from where such aspirations stem, John Locke’s pusuit of “life, liberty and property”. In doing so he appears to have committed a cardinal sin: profiting by undermining everybody else in America.

This will have deep consequences. Balzac summed it up best: behind every great fortune lies a great crime. Paulson has not broken any laws. He was no rogue trader like the dodgy book-keeper in Paris’ Societe Generale. He bet on the greed of the US public overtaking its better judgement.

But Americans will undoubtedly soon start screaming at politicians, regulators and even the banks themselves for being not clever enough to not see that their world was falling apart and for not doing something to hold it all together. Paulson on the other hand will be simply counting his money. This may take some time.