Wednesday, 30 July 2014
Last updated 13 min ago
Feb 3 2010 | 7:49pm ET
In its continuing quest to understand the derivatives at the heart of the financial crisis, the Securities and Exchange Commission plans to pick the brain of the man who profited most from them.
The regulator has sent a request for information to Paulson & Co., the $30 billion New York-based hedge fund run by John Paulson, the Financial Times reports. Paulson made his name and fortune three years ago when he bet against the subprime mortgage market and won big, earning $15 billion for his investors.
According to the New York Post, Paulson is cooperating with the SEC. He is not the target of the probe, which instead is focused on the banks that created and marketed collateralized debt obligations.
Paulson earned triple-digit returns betting against the housing market in 2007, with his flagship Credit Opportunity Fund soaring nearly 600%. According to the FT, Paulson pushed banks to create synthetic CDOs for him to short, promising to buy the lowest-rated tranches of the CDOs. He also reportedly sought to specifically include mortgages from parts of the U.S. where he believed the mortgage market was particularly vulnerable.
In December, the SEC subpoenaed most of the top banks on Wall Street, including Bank of America Merrill Lynch, Citigroup, Goldman Sachs and Morgan Stanley, among others, seeking information about their sale and marketing of CDOs.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…