What this country needs is a John Galt Trade-of-a-Lifetime Award for John Paulson

What this country needs is a respected, conservative and courageous institution, well known in the fields of economics and finance, to step forward for an important bit of public affairs theater.

The objective is to rescue the market system from the clutches of the collectivists, who are in the process of replacing that system with a command economy. Although few noticed it, a command economy is what President Obama clearly indicated he wanted during his campaign. As president, he has done nothing that would suggest a change of mind.

In the current scene, Obama's Securities and Exchange Commission is making a bogeyman out of John Paulson, a hedge fund proprietor who persuaded Goldman Sachs to devise a financial instrument that he could use to short the subprime mortgage market a few years ago.

Goldman obliged, creating the Abacus as a proxy for collections of specific mortgage-based derivatives that Paulson had chosen as likely candidates for the ashheap. Entering the market at or near its red-hot peak, Paulson sold high.

Then the economy weakened. As Paulson had anticipated, subprime home owners began defaulting on their mortgages, the derivatives market began its meltdown, and the economy cratered. During the decline, Paulson bought low, closing out his transactions with a profit reported to be in the billions of dollars.

Now the collectivists are seeking "justice," denouncing Paulson and Goldman Sachs while the Securities and Exchange Commission is suing Goldman, alleging fraud in Goldman's shorting the market, on its own and on Paulson's behalf, while continuing to sell derivatives to rank and file investors and institutions.

While that practice may seem unseemly, it is not an unusual situation. Brokerages routinely sell a stock to some clients while shorting the same stock for other clients. In earlier administrations, this was regarded as normal behavior reflecting differing judgments and expectations.

Paulson's short sales may have hastened the slide in the derivatives market, but that isn't the main problem. The main problem is that the derivatives market did not originally provide for short-selling, which serves as a brake on overheated markets. If the Abacus had been available earlier, the derivatives market might never have reached unsustainable levels, and the ensuing selloff might not have cratered the economy.

Investors who were buying mortgage-based derivatives while Paulson was selling short are, of course, furious. Since bad judgment is never a suitable explanation of a bad trade, they are looking for a scapegoat. Paulson is available. Pillorying him may produce some votes for Democrat politicians crying for blood.

Why doesn't some well-meaning, conservative, market oriented institution - say, the Hoover Institution - invent a new award and give it to Paulson. Call it the John Galt Trade-of-a-Lifetime Award.