"But there was nothing at all wrong or anti-social about betting against the housing market near the peak of the bubble,"

I can't believe Dean Baker has uttered these words about JP. The implicit presumption in this "interpretation" of JP's impending liability is that Paulson was simply making a measured bet against a financial bubble, in a fwee market, that formed because, well no one knows. The charge is that Paulson was not just betting against the bubble. He was part, a central player, in a pervasive, criminal conspiracy to defraud tens of millions of people of their life savings.

If some mutt is accused of holding up a 7-11 with a squirt gun for a case of beer and cigarettes, there are 100 cops, legislators, and judges waiting to send him away for 10 years. If a super-rich, super villian is exposed for participating in a conspiracy of fraud, the academy wants to exhonerate him as a "hero".

By the same logic, I suppose, Bernie Madoff was a "hero" for helping to cool the financial bubble. The heroes are the everyday Americans who set the standard for our way of life, by living honestly with integrity and trust. Sure as hell not John Paulson. If he is culpable, indict him, now.

When homeowners lose, the NPR ruse,
is always Who Could Have Known.

When investors lose, then everyone knows,
It's Madoff, it's Paulson and crew.

Hang the bastards as bad actors they are, but leave the system alone.

It's working fine for those in the know, with nothing for which to atone.

OK, after rereading your post, I overstated your position. After reading the academics at Thoma's blog making excuses for the behaviour of the rating agencies, I transferred my frustration. My apologies.

The accusation against Goldman is that they were in effect using inside information (they designed the packages they or their clients were betting against) to make secure "bets". Using inside information is not good no matter what part of the cycle it is on. My impression is that successful short-sellers don't really take the plunge until the market is definitely going down, and that they may often know this through inside information. Certainly a number of people did this in the crash of 1929. Short-selling is sometimes touted as one of the things that make markets "self-regulating", but in practice it may be something, like CDS's, that make them less stable. To some extent it's another gimmick that insiders can take advantage of.

> If he helped to deliberately mislead investors about his own role

Misleading other investors is not a crime if he had no fiduciary duty towards them or pressed/helped Goldman to not fulfill their fiduciary duty. I agree that betting against the housing bubble would be good, if it helped to shorten it. As Yves Smith has written about the Magnetar trade, some shorting actually prolonged the bubble - the overall framework had changed for the worse with the introduction of CDS.

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