Friday, October 1, 2010

Oracle- John Paulson

John Alfred Paulson (born December 14, 1955) is the founder and president of Paulson & Co., a New York-based hedge fund.

Early life
Paulson was born in Queens, New York, the son of Jacqueline and Alfred Paulson, a chief financial officer for Ruder Finn.[2][3] Paulson attended the Whitestone Hebrew Centre (a United Synagogue of Conservative Judaism school) in Queens. He received his bachelor's degree in finance from New York University’s College of Business and Public Administration (now called NYU Stern School), where he graduated first in his class. He earned his MBA from Harvard Business School, where he was designated a Baker Scholar, the school's top academic honor, for graduating in the top 5 percent. Paulson began his career at Boston Consulting Group before leaving to join Odyssey Partners, working under Leon Levy. He later worked in the mergers and acquisitions group at Bear Stearns. Prior to founding his own firm, he was a partner at mergers arbitrage firm Gruss Partners LP. In 1994, he founded his own hedge fund with $2 million and two employees (himself and an assistant).

[edit] Hedge fund
Paulson & Co., Inc. had assets under management (as of June 1, 2007) of $12.5 billion (95% from institutions), which leapt to $36 billion as of November 2008.[4] In 2007 alone he made $15 billion for his firm.[5] Under his direction, Paulson & Co has capitalized on the problems in the foreclosure and mortgage backed securities (MBS) markets. In 2008 he decided to start a new fund that would capitalize on Wall Street's capital problems by lending money to investment banks and other hedge funds currently feeling the pressure of the more than $345 billion of write downs resulting from under-performing assets linked to the housing market. On May 15, 2008, Paulson & Co., which bought 50 million shares of Yahoo stock during the first quarter of 2008, said it is supporting Carl Icahn on a proxy fight to replace Yahoo's board.[6] In early 2008, the firm hired former Federal Reserve Chairman Alan Greenspan.

In September 2008, Paulson bet against four of the five biggest British banks.[7] His positions included a £350m bet against shares in Barclays; £292m against Royal Bank of Scotland; and £260m against Lloyds TSB.[8] He eventually booked a profit of as much as £280m after reducing its short position in RBS in January 2009.[9] On August 12, 2009, Paulson purchased 2 million shares of Goldman Sachs as well as 35 million shares in Regions Financial.[10] Paulson has also purchased shares in Bank of America expecting the stock to double by 2011.[11] In November 2009 Paulson announced he was starting a gold fund focused on gold mining stocks and gold-related investments.[12]

In December 2009, the New York Times reported that Paulson had profited during the financial crisis of 2007 by betting against synthetic collateralized debt obligations (CDO's). [13]

On February 22, 2010, Paulson's fund was linked with the restructuring and recapitalization of the publisher Houghton Mifflin Harcourt.[14] Highlights of the agreement include, a reduction in the senior debt to $3 billion from the current $5 billion, with new equity issued to the senior debt holders (including Paulson & Co., Guggenheim Partners, and others),[15] conversion of the $2 billion mezzanine debt into equity and warrant, receipt of $650m of new cash from the sale of new equity.

According to The Irish Times, [16] the investments by the current equity holders of EMPG, including HMH's CEO Barry O'Callaghan, private clients of Davy Stockbrokers, Reed Elsevier, and others, will see their investment of over $3.5 billion written down to zero.

[edit] SEC v. Goldman Sachs
On April 16, 2010, Paulson & Co. was mentioned by the U.S. Securities and Exchange Commission in court fillings when the SEC sued Goldman Sachs and one of Goldman's CDO traders. The SEC alleged that Goldman Sachs materially misstated and omitted facts in disclosure documents for a synthetic credit default obligations (CDO) product it originated. The allegation was that Goldman Sachs misrepresented to investors that an objective third party (ACA Management) had assembled the mortgage package underlying the CDOs when, in fact, Paulson & Co., with economic interests directly adverse to investors, had a major role in assembling the mortgage package.[17]

As a counterparty in the CDO transaction, Paulson & Co. stood to reap great financial benefit in the event of default. (It's alleged that Paulson selected a portfolio of CDOs that were likely to default, against which Paulson & Co. had already sold short or would sell short.)[18][19] Paulson & Co was not a defendant in the case.[17]

Paulson & Co says that "it is not the subject of this complaint, made no misrepresentations and is not the subject of any charges."[20]

[edit] Other
John Paulson is not related to former Goldman Sachs CEO and U.S. Treasury Secretary Hank Paulson.[21][22][23] A September 26, 2008 Wall Street Journal op-ed piece written by John Paulson suggested an alternative to the Treasury Secretary's plan for stabilizing the markets.[24]

Paulson is #45 on the Forbes list of the world's wealthiest billionaires[25] and is worth approximately $12 billion as of 2010. On April 16, 2010, the New York Times reported Paulson had earned $1 billion in 2007, $2 billion in 2008, and $2.3 billion in 2009 from fees received from his hedge fund by betting against subprime mortgages long before the term became well known.[26] On April 19, 2010, the Wall Street Journal reported that Paolo Pellegrini, 53, who worked for Paulson, had emerged as the point man for Paulson & Co. investing in subprime mortgages. [27]

Paulson’s donation of $15 million to the Center for Responsible Lending is the largest contribution the non-profit received. The organization works to persuade banks to provide better mortgage terms to applicants with less than stellar credit. [28]

In 2010, Paulson donated $20 million to New York University Stern School of Business to fund the school’s faculty research, scholarships, and campus renovation.[29]

Paulson contributed more than $140,000 to political candidates and parties since 2000, with almost 2/3 going to Democrats.[30]

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