Great question, Libertad. Soros various, and there are references to some of his trades in these posts. Paulson is also various, but it was well-explained in Tavakoli's books that he shorted the credit derivatives index linked to securitizations backed primarily by second liens. She even describes her clients waiting for that trade to pay-off in Nov of 2006 in her Structured Finance book, and gives it fast treatment in her new book with Buffett in the title, but mentions Paulson trying to stop Bear Stearns from changing credit derivatives language that would have hurt his trades. She also explains a lot of other stuff that caused the Bear funds to implode and then Bear itself. Paulson was a former Bear Stearns guy, so it is interesting that Paulson was suspicious. His first big short was probably the ABX.HE 06-2 BBB-. According to Tavakoli's book for pros: "referencing BBB- tranches of 20 various home equity loan asset backed deals." Those 20 deals backing the asset backed securities were scattered around different I-banks. As that came more and more in the money she explains how hedge funds shifted to higher rated stuff that was slipping in value. Now seems he's looking at distressed assets since pricing is a mess, and people who know what they are doing can find stuff that is underpriced.
Regarding your first point - how would any of that have altered the fact that the western financial system was and still is insolvent due to absurdly leveraged lending on bubble-valuation assets? Selling Neuberger Berman and freeing up a few hedge funds' capital would have stopped the bust after the greatest real estate bubble in the history of the western world? Somehow I doubt it. Regarding your other two points, that argument is still there - no one ever said the aftermath of a bubble is pretty. The tech bust was pretty horrendous for that sector, for example. Why should a real estate bust, involving leveraged banks operating under a fractional reserve system, be anything different? Bear in mind that we haven't actually had a laissez-faire response, but rather massive government intervention. Things must be about to turn the corner then?
Yeah because until Lehman, real estate was doing fine, and the banking sector was fundamentally sound? Come on. That makes as much sense as saying that letting Worldcom fail caused the telco bust, or letting pets.com fail caused the nasdaq to fall 80%.
there were only 5 firms who rule wall street. Lehman, Bear Stearns, Goldman Sachs, Citigroup, BAC and many smalller firms but those were the biggest market participants. counter party risk. contracts are void. so anyone doing business with any firm declaring chapter 11 also risk going chapter 11 that is dominoes effect on wall street. and when wall street fucks up it has an effect on main street as main street has retirement funds in wall street.
the gov't saved LTCM in 1998 and this is what you get in 2008!!!!! moral hazard. that derivative casino market should have been shout down long ago cause it was NOT regulated. those firms in wall street became even more risk with derivative after LTCM was bail out after their math models failed to see the crash of 1997 asian curreny crisis.
the math models in the derivative market didnt' calculate HUMAN FRAUD and HUMAN market manipulation and HUMAN GREED