By one RDF:
Joe goes to the track and bets $2 on a horse.Wait for it:
Two guys standing nearby get into a discussion and Fred says to Sam, “I’ll bet you $5 that Joe wins his bet.”
Next to them are Bill and Bob. Bill says: “I’ll bet you $10 that Fred welshes on his bet if he loses.”
Next to them is Sally. Sally says: “For $3 I’ll guarantee to Bill that if Bob fails to pay off, I’ll make good on the bet.”
Sally then goes to Mary and borrows the $7 needed in case she has to ever pay off and promises to pay back $8. She doesn’t expect to every have to pay since she believes Bob will always make good. So she expects to net $2 no matter what happens to Joe.
A quick calculation indicates that there is now 2+5+10+3+7 = $27 riding on the outcome of the horse race.
Question how much has been “invested” in the horse race?
Answer:So, when Hank Paulson and his golfing buddies go to the track and lose the rent money playing the ponies, we should pay up?
$50,000 by the owner of the horse who is expecting to recoup his investment from the winnings of the horse and other future deals. Everyone else is gambling, not investing.