One reason for this is that Paulson was able to recognize and act on the unimaginable—that the banks, which took on most of the subprime risk, had no clue what they were holding or how much it was worth.
More Paulsons and maybe the banks might have 'imagined' this possibility. How is it possible to be morally outraged with the irresponsible banks and Paulson.
* The greedy banks were giving out loans to people they knew couldn't afford them.
* The greedy people were taking loans on homes they couldn't afford.
* (Now) Paulson was greedy to profit on the system collapsing.
Of course everybody was acting greedy! That is the idea behind capitalism. Complaining about greed in a system based on greed is unproductive and whiny.
Though short-sellers are hated, they are necessary. For every trader who goes short, there's a trader who goes long. No one is forcing them to enter this trade. They do so because they want to. Banning short-selling would be a disaster because prices would stop reflecting reality.
Paulson may have made money in an "unethical" way, but he played by the rules. I didn't hear any investment banks complaining about short-selling when they were making money. They were dumb. They lost. They won't be missed.