Ex-Goldman Trader Bought Major Stake in ACA, Shorted Subprime CDOs
The Goldman-Paulson fraud suit threatens to throw a spotlight on a realm of Wall Street that has escaped most scrutiny throughout the financial crisis: the hedge fund industry. Top hedge fund managers profit from Wall Street’s business model of fraud and collusion more than any CEO at the big banks, but tend to evade accountability because of the opacity of their industry and their extraordinary power.
One such hedge fund manager is Richard Perry. Perry, a former Goldman Sachs trader, became known as one of the subprime winners in 2007 — one of the hedge fund managers who saw the crisis coming, and placed profitable bets that the housing market would collapse. Perry reportedly shorted $3 billion in subprime-related securities, netting a $1 billion profit on the trade.
Perry’s winning billion-dollar subprime short, alongside his major investment in ACA, is all the more notable because of his ties to Goldman Sachs. He was a star trader at the bank under former Goldman Sachs head Robert Rubin, and has partnered with the bank on investments in recent years. Perry is extremely close to Rubin, outside of the professional context — former babysitter to his children, teaching assistant, and advisory board member at Rubin’s Hamilton Project. Despite being extremely close to someone who made $1 billion shorting the subprime market, Rubin has called the financial crisis a “perfect storm” that no one saw coming.
Read the rest here