How Smart Growth Policies Helped Paulson and Goldman Sachs Short Housing

Conn Carroll / May 07, 2010

Everybody now knows that the hedge fund at the center of the Goldman Sachs SEC complaint, Paulson & Co., made a fortune by selecting credit default obligations made up of high risk mortgages. What is less well known is how Paulson picked mortgages. The Wall Street Journal reports: “According to the SEC complaint, [Paulson and Company head John] Paulson especially wanted to find risky subprime adjustable rate mortgages that had been given to borrowers in California, Arizona, Florida, and Nevada—states with big spikes in home prices that he reckoned would crash.”

What do these states have in common? Heritage fellow Ron Utt notes: (more…)