John Paulson Gives Harvard A Taste Of What It Missed

Just sayin'.
Author:
Publish date:
Updated on

How you like me now?

So John Paulson (HBS ’80) just gave Harvard more money than any single person has ever given Harvard in almost 400 years, topping not only Ken Griffin, but the guy who topped Ken Griffin last year, and getting a school he didn’t attend named for him in the process. Much of the commentary around the $400 million gift to Harvard’s engineering program—which, contrary to what most people believe, is not a euphemism for MIT—involves a lot of hand-wringing over whether a school with $36.4 billion in the bank needed another $0.4 billion, or about just how forgiving, generous and magnanimous John Paulson is, given that Harvard told him to get bent when he presented it with a crazy idea to short the hell out of the housing market in 2006.

The again, future graduates of the I Told You So School of Engineering and Applied Sciences will have to wonder whether JP’s philanthropy is an extremely expensive and elaborate way of suggesting to Harvard that they could be sitting on $100 billion if they had just given him the entire endowment to invest when he asked for it.

In 2006, Mr. Paulson was a merger arbitrager with growing fears about an entirely different market than merger stocks – housing. His hedge fund, Paulson & Co., decided to start a new fund to short, or bet against, dangerous subprime mortgages, hoping to score a home run of a lifetime….
Mr. Paulson decided to target the endowment of Harvard, where he attended business school, hoping the imprimatur of the prestigious school’s endowment might encourage other investors to sign up for the fund. Mr. Paulson traveled from his New York office to Boston to meet Mark Taborsky, who at the time helped pick hedge funds for the endowment. Their meeting ended in disappointment for Mr. Paulson. Mr. Taborsky was wary of the cost of the derivatives Mr. Paulson hoped to buy. He also wasn’t as gloomy about housing as Mr. Paulson.

Harvard already was purchasing some mortgage protection, Mr. Taborsky told him, though the university focused on more inexpensive derivatives that didn’t have as much upside as those Mr. Paulson hoped to buy. “Look, guys internally are doing this already,” Mr. Taborsky told Mr. Pauslon, according to a passage in The Greatest Trade Ever. (Written by yours truly.) After the meeting, a frustrated Mr. Paulson told a friend: “They ought to be in…they should get it.”

John Paulson Overlooks Harvard’s Big Brushoff [WSJ MoneyBeat blog]
Hedge-Fund Manager Paulson to Donate $400 Million to Harvard [WSJ]

Related