It's not something he likes to talk about, but in light of his role in the SEC investigation against Goldman Sachs, John Paulson feels that it is necessary to point out that back in 2007, when he asked Goldman to create a collaterized debt obligation made up of securities tied to subprime mortages so that he could bet against it, he was not exactly the BMOC he is today. In fact, he was more like the kind of guy who chain-smoked and conducted meetings half in the can with pieces of bloody toilet paper stuck to his chin. And so it's not like the investors buying into the resulting product, Abacus, were going to be like, "OMG! The Great John Paulson is on the other side of this trade! We'd better do whatever he says!" It was more like, "Oh, some small-time merger-arb guy whose name I can't remember wants to short a housing market that everyone else says is going to continue to soar, so, whatever."
Mr. Paulson sent a letter to investors Tuesday night saying that in 2007 his firm wasn't seen as an experienced mortgage investor, and that "many of the most sophisticated investors in the world" were "more than willing to bet against us."
It pains him to say it, but there it is.