With whom do these firms place their bets?
Cross of Gold Fareed Zakaria, 23 April 2010, Newsweek
How the rush to crucify Goldman Sachs is clouding our judgment and distorting public policy.
In most of them, the people who bet the housing market would go up made money, and those betting it would fall—Paulson's side—lost money. ...
And I'm in favor of most of the proposals the Obama administration has put forward. But it would be a mistake to criminalize retroactively what was standard business practice.
Betting on whether or not loans a company makes is "standard business practice" for the companies involved in the lending? How did that ever become part of legal lending practices? (backtracking just now to find out what a hedge fund is, plus what is meant by short selling and derivatives, hasn't helped me to understand the betting part)
I understand that anyone can find a bookie and lay wagers on whether X will happen or Y will happen, but not as part of a businesses operations.
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