John Paulson is a billionaire many times over who made a massive amount of money for himself and his clients during the financial crisis, betting against the housing market. Since then, things have gone less swimmingly for J.P. and the people whose capital is tied up in Paulson & Co., to the extent that one might wonder aloud why the hedge-fund manager hasn’t just packed up his things and gone home (to his 28,500-square-foot town house). In 2011, Paulson’s ironically named Advantage Plus fund suffered a 52 percent decline, its worst in the firm’s 17-year history. And, with the exception of a banner year in 2013, things have been pretty bleak. Back in January, Paulson was forced to put up his own investments as additional collateral for a credit line with HSBC and through November 4, his love of the health-care sector, particularly a little company called Valeant Pharmaceuticals, was reason alone to close his office door, draw the blinds, and weep. Still, there is one thing that’s turned out unexpectedly well for the guy and that’s the bet he made on Donald Trump, when it seemed like rooting for the candidate was going to go down as one of his worst investments yet. Per Bloomberg:
With Trump’s victory, Paulson—a political donor and economic adviser to the president-elect—is already seeing a payoff. His funds have a stake in Fannie Mae and Freddie Mac, once virtually worthless, whose common-class shares soared more than 80 percent since Election Day.
And while other hedge-fund managers and bankers are generally hoping for a warm welcome from Washington once Trump takes office—betting that the new head of the Securities and Exchange Commission, for example, will be less inclined to prosecute insider trading or levy large fines on companies than he or she is to send everyone on Wall Street a weekly Edible Arrangement—Paulson has a specific wish he wants the president-elect to grant:
Fannie Mae and Freddie Mac were taken over by the government in 2008, at an eventual cost of $187.5 billion. The Obama administration later changed the terms of the bailout, so that the government received most of the companies’ profits, and it’s more than recouped the bailout costs. Shareholders have been seeking redress in court ever since—and also working furiously to change the policy and allow the companies to keep more of their earnings. The move to sweep all profits “violated the rights of thousands of shareholders across America,” Paulson & Co. said in an e-mailed statement. It said the government’s action also violated the law enabling the takeover of Fannie and Freddie. “This action should be reversed, and we look forward to an outcome that restores the rights of shareholders in these companies.”
Trump obviously can’t get it done in time for Paulson’s December 14 birthday or Christmas, but just think of what a great V-Day gift privatizing Fannie and Freddie would make. It might be uncomfortable to outright say, “This is what I want,” but surely, as an adviser, J.P. can drop some less-than-subtle hints.