In defense of Paulson, he is a hedge fund manager and anyone who invests with him should realize that there is significantly more risks investing in hedge funds and should stay away from strategies like his if they are unable to accept the severevolatility.
Overreliance on markets and models led the SEC and its sidekick FASB to put into place the highly procyclical and ultimately very destructive market-to-market accounting system, despite strong warnings from the secretary of the Treasury, the chairman of the Fed and the chairman of FDIC that it would create greater volatility in banking and lead to severe credit crunches.