One last thing from yesterday's Goldman hearing. In his testimony, Fabrice "Fabulous Fab" Tourre, the VP named in the SEC's lawsuit, gave a clear answer to a question we've had about the case.
According to the SEC, ACA — the company that put together the CDO at the center of the case — was wrongly led to believe that the hedge fund Pauslon & Co. was taking a long position in the CDO. (Paulson was short.)
Tourre directly addressed this allegation:
...I never told ACA ... that Paulson & Company would ... take any long position in the deal. ... I recall informing ACA that Paulson's fund was expected to buy credit protection on some of the senior tranches of the AC-1 transaction. This necessarily meant that Paulson was expected to take some short exposure in the deal. ...
If ACA was confused about Paulson's role in the transaction, it had every opportunity to clarify the issue. Representatives of Paulson's fund participated directly in all of my meetings with ACA regarding the transaction.