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In season 1 of Game of Thrones, Lord Baelish sets up Lord Stark when he helps set up the fake coup. After watching season 1 and most of season 2, I still don't understand why Lord Baelish did this. What was his reasoning for setting up Eddard Stark instead of helping him protrect the throne?

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Peter Beaelish wants one thing: power. He is the son of a very minor lord with very poor holdings. He grew up seeing the love of his life get married to someone else with a more powerful family name. He knows that he can never actually rule in name, but he wants to be at least the real power behind the throne. For that to happen he needs to setup a puppet king that he can control.

So Lord Beaelish's plan was to back Joffrey's claim to the throne and isolate him from his mother (and the Lannisters) with Lord Stark serving as Joffrey's regent since he is under-aged. In return for this he expected to become Lord Stark's right hand man, giving him a great amount of power especially given Stark's limited political skills.

But Lord Stark had other ideas. He wanted to expose Joffrey's parentage and install Stannis Baratheon and the new king of Westeros. Lord Baelish knew Stannis very well from serving with him in the Small Council. Stannis is a humorless man who had no patience for his scheming and was someone he could not easily manipulate, thus costing him a great amount of power and influence. This was, to him, unacceptable.

So Lord Baelish sided with the Lannisters and helped them foil Stark's plan. Now he has the trust of the Lannisters with all the influence that gives him. The Lannisters are nothing if not generous to those loyal to them, and through further services to the Lannisters he is awarded with the lordship of Harrenhall.

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Baelish betrays Stark because Eddard was going to go against his wishes to have Joffery be the successor. While as insane a plan as it seemed, it was Littlefinger's best chance to retain what power he had as Head of Coin.

Should Joffery be proven to be an illegitimate child and not heir to the throne, Littlefinger has a high chance that he'd lose his position and could not allow Eddard, the man of honour, take that away from him.

This resulted in turning the City Guard against Ned, instead of in his favour.

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Littlefinger cares about Littlefinger and absolutely nothing else. There is a conversation he has with Ned Stark about their plan. Ned insists on bringing in Robert's brother once Joffrey is dethroned. Littlefinger points out that the new king would probably replace everyone at court but Ned does not care.

This is where Littlefinger tipped the otherway.

If he had supported Ned he would have done himself out of a very nice job with little chance of progression.

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