There are various ways to describe the synthetic collateralised debt obligation that Goldman Sachs constructed for John Paulson, the hedge fund manager who bet on the collapse of the mortgage bubble.

Goldman itself terms it “nothing unusual or remarkable”. The US Securities and Exchange Commission describes the Abacus deal that closed in April 2007 as securities fraud. I call it short-term greedy.

Goldman rose to its dominant position on Wall Street through the dictum of Gus Levy, its former senior partner, that it should be “long-term greedy”. He meant that it should forego quick gains for enduring profits.

The bank's expression of that principle on its website is: “Whether a mid-size employer in Kansas, a larger school district in California, a pension fund for skilled workers, or a start-up technology firm, our clients' interests come first.” So what about a Düsseldorf bank?

In late 2006, after an internal debate on its mortgage desk, Goldman made a far-sighted decision to protect itself from what it had come to fear would be a severe downturn in the housing market. It pulled back from taking risk and hedged its mortgage book, saving itself from the deluge.

At exactly the same time, it was approached by Paulson & Co to structure a CDO that the hedge fund could make money by shorting. Paulson offered it a $15m fee to assemble the deal and find an investor that would take the risk from which Goldman was simultaneously fleeing.

Fabrice Tourre, Goldman's