“Hedge-Fund Manager Paulson to Donate $400 Million to Harvard” is a WSJ story about what will become the “John Paulson School of Engineering and Applied Sciences” at Harvard.
What I find interesting about the story is not that a rich guy gave money to Harvard (dog bites man) but the hostility of the Wall Street Journal readers to Harvard and Paulson. In my opinion Paulson made money more or less straightforwardly and without exploiting any special connections. He recognized that most of America’s financial institutions were defrauding investors by lending out mortgage money that would never be repaid (except by taxpayers!). He charged a fee to his own investors, of course, but he made them a lot of money in a time period when other funds were tanking. I would have thought that Paulson would be a hero to market-following WSJ readers, not a villain.
Here are some representative comments:
- So a guy who knows that the mortgage market is heading for a fall (inside info) bets against it and makes a billion dollars off the American people, who get screwed. Then he feels somewhat guilty (maybe) and donates it to one of the wealthiest colleges in the World. What a joke!!
- REALLY …. all it does is add to INEQUAlITY in America giving more $$$ to a college whose principle purpose is as a place for the children of the American Ruling Class to enjoy themselves for 4 years while getting their ticket punched and increasing the size of their own personal network of the privileged which will serve them well in the Real World.
- While very noble, why don’t some of these gazillionaires make a big donation to a particularly bad school system with the conditions that it FIRE the incompetent teachers and hire good ones. (like the Facebook founder did with Newark Public Schools? (my May 2014 posting))
- Paulson will pay no income or estate taxes on $400 million made from soaking the American people. Harvard, which doesn’t need the money, and increasingly neglects educating America children, especially African-American children, won’t pay any taxes, either.
- $400 million to cook up more liberal ideas and citizens. Way to go.
It’s interesting how the monster feeds itself and grows, and notice that the biggest chunks of money come from people who play with other people’s money, not people who actually produce any goods or services, which are what constitutes the real wealth of the nation. - Down the street or river, whichever you prefer to go, stands M.I.T. Now, there they educate people who actually contribute to the wealth by producing actual goods, not like at Harvard where the biggest donors play with other people’s money as per this article (fund managers). The latter make Barack and Hillary, who are good only at using other people’s money, proud.
Related:
- what would John Paulson pay as child support defendant in Wisconsin?
- “For the love of God, rich people, stop giving Harvard money” (Vox)
- Malcolm Gladwell suggests volunteer jobs for Paulson (e.g., at a Hermes store in Manhattan)
philg, do you think that at least some of the comments making sense or not? Given WSJ’s terrible tracking record in predicting financial crises and bubbles for the last two decades perhaps committed readers are jealous of Paulson’s analytical ability. Or maybe they recall conflict of interest that arose when one of major investment companies put its clients and Paulson’s fund on different sides of same deals in mortgage securities, I do not recall details at this moment.
Do the comments make sense? Sure, as long as you believe that humans are subject to envy. I had the same idea as Paulson back in 2006 but didn’t execute on it (was very tough for consumer investors to short mortgages but one guy did manage to do it and, of course, I could have started my own hedge fund!). So now I am envious that he made $billions and I did not. One of the investment banks did put together some special instruments for Paulson that contained the mortgages most likely to fail, but to the extent fraud was perpetrated on an investor on the other side of the trade it was the bank that that defrauded the investor, not Paulson. https://www.deepcapture.com/2010/01/john-paulson-and-the-greatest-pump-and-short-fraud-ever/ has a bit of a summary and also http://www.thedailybeast.com/articles/2010/04/19/inside-paulsons-deal-with-goldman.html and finally https://www.sec.gov/news/press/2010/2010-59.htm Paulson was not secretive, I don’t think, regarding his belief that the U.S. mortgage market was full of garbage.
Same deal regarding Harvard as an educational institution. Careful studies have shown that a Harvard education per se is no better than U. Mass or U. Michigan or whatever. At least the white people who got into Harvard and went to state schools ended up doing just well as corresponding Harvard grads (some evidence that admitted under affirmative action because of their skin color did get a boost). Harvard maintains a reputation for excellent graduates because it has a reputation for excellent graduates and therefore excellent 18-year-olds keep showing up (at least Harvard typically doesn’t make them any worse over four years!). So Harvard employees get to keep congratulating themselves for student achievement that occurred primarily in the years prior the students showing up to Harvard.
On the other hand, the donation to the Newark Public Schools seems to indicate that there is no limit to how much money a public school system can waste.
Thanks philg. Hard to ague that many departments of Harvard science graduate school are at forefront of modern science and should be well financed. Harvard college gave us Facebook, for better or for worse. I also think that comments about ‘punching the ticket’ and ‘increase valuable network contacts’ may be correct for large portion of their undergraduate enrollment. Hard to imagine that networked connections played no role in the scandal you mentioned, knowing how things are usually run. I maybe wrong here an I never asserted that Paulson was guilty of financial fraud. Neither I argue against current system – it had been working more times that it had failed. I am a little worried about general direction of where it is taking us.
Where did the money come from? The other side of the CDS. Who was on the other side of the CDS? I think the public has a right to know, given (from what I understand) that the US gov’t bailed out the banks that were on the other side of it.
I would point out something odd – Paulson went only to NYU, and took creative writing, film, and philosophy, before taking a break and then going back to school to get his MBA (business). Why is he funding STEM/ engineering?
“Down the street or river, whichever you prefer to go, stands M.I.T. Now, there they educate people who actually contribute to the wealth by producing actual goods”
I find this comment quite funny. Personally I’m not sure the MIT CS grads that went off to build yet another photo sharing app or e-commerce website is really adding that much value to society. Besides, at least when I was there, the favorite employers at MIT year after year were Goldman Sachs and McKinsey…
Will this $400 million be enough to make Harvard a contender in engineering? This goes way back – Harvard wanted to acquire MIT at the beginning of the 20th century (just before MIT moved across the river to Cambridge) because even then it was behind in engineering and it has never caught up. The comments were bitter but maybe they were on to something. What accounts for Harvard’s inability to have a 1st class engineering dept.?
> What accounts for Harvard’s inability to have a 1st class engineering dept.?
A bridge is different to a bank. If a bridge collapses the government doesn’t order everyone to go and stand underneath and catch it.