Andy Kessler has an article in the WSJ in which he claims the Paulson bailout will prove to be the greatest trade since Seward bought Alaska:

In 1992, hedge-fund manager George Soros made $1 billion betting against the British pound. In 2007, John Paulson’s Credit Opportunities fund correctly bet against subprime mortgages, clearing $15 billion for the year and $3.7 billion for him. Warren Buffett is now hoping to make big money on Goldman Sachs.

But these are small-time deals. My analysis suggests that Treasury Secretary Henry Paulson (a former investment banker, no less, not a trader) may pull off the mother of all trades, which could net a trillion dollars and maybe as much as $2.2 trillion — yes, with a “t” — for the United States Treasury.

Kessler then goes through how we got here and we’ve gone over that here before, but he also adds a twist that I haven’t covered. He claims that hedge funds were shorting financial stocks and then bidding down the price of CDOs on Wall Street balance sheets. I’m not sure how that was accomplished, but it sounds plausible.

So he believes the market value of the CDOs has been depressed artificially and that Paulson is getting a great deal buying Fannie/Freddie and what he will buy with his $700 billion check from Congress. He believes that by owning all these assets, the government will be able to improve its balance sheet and create higher growth. I have a lot of doubts about that, but Kessler is a smart guy so I hope he’s right.