John Paulson May Have Made $428 Million Shorting Lloyds

By GottaLaff

We've had our fun with Jim Cramer's bragging about shorting stocks. But we're not having fun any more:

Paulson & Co., the hedge fund run by billionaire John Paulson, may have made 311 million pounds ($428 million) since September by short selling Lloyds Banking Group Plc and HBOS Plc.

The firm took short positions in London-based Lloyds and HBOS that were valued at 367 million pounds in September, based on the holdings and share prices on the dates they were reported. The stake fell below the reporting threshold on March 9, regulatory filings show.

Paulson, which made $3 billion anticipating the U.S. housing market would collapse, gained as Lloyds, HBOS and Royal Bank of Scotland Group Plc sought bailouts from British taxpayers. Lloyds surrendered control to the government on March 7 in exchange for asset guarantees. Paulson made least 295 million pounds shorting RBS, bringing its profit from betting U.K. banking stocks would drop to 606 million pounds, according to earlier disclosures. [...]

Paulson’s Credit Opportunities Fund soared almost sixfold in 2007 on bets that subprime mortgages would plummet. [...]

Short sellers sell borrowed shares with plans to buy them back later at a lower price. The Financial Services Authority, the U.K. market regulator, lifted a ban on short-selling financial companies on Jan. 16. The restrictions were imposed in September as politicians and investors blamed hedge funds for destabilizing markets. [...]

Prime Minister Gordon Brown’s government has taken control of four British banks since the run on Northern Rock Plc in September 2007 as it seeks to boost lending and stimulate economic growth. [...]

Hedge funds are private, largely unregulated pools of capital whose managers can bet on falling as well as rising asset prices, and participate substantially in profits from money invested.

H/t: Fernando