John Paulson, Donald Trump's favorite financier

He is Donald Trump's favorite financier. This Saturday he is hosting a fundraising event for his US presidential campaign, and he could be Secretary of the Treasury if the tycoon wins the election. John Alfred Paulson (New York, 1955) became rich by shorting subprime mortgages before the 2008 crisis.

He runs Paulson & Co, a New York-based investment management firm that he founded in 1994. Forbes estimates his fortune at $3.5 billion. The event held this Saturday in Palm Beach (Florida) is also chaired by businessmen and investors who supported Trump's Republican rivals, such as Ron DeSantis. Trump trails Biden in fundraising, and also faces millions of dollars in legal bills from his lawsuits. According to Bloomberg, Trump has privately discussed Paulson as an option to run the Treasury if he wins the election.

The investor has donated to the campaigns of Democratic and Republican politicians, but in greater amounts to these; in particular, Mitt Romney, and of course, Trump. He was one of the first figures to support him when he was elected the Republican presidential candidate in 2016, and one of his main economic advisors in that campaign.

Paulson was born in Queens, a neighborhood in New York. He is the third of four brothers. His father, Alfredo Guillermo Paulsen (later he would change it to Paulson), was born in Ecuador, to a half-French and half-Norwegian father and an Ecuadorian mother. He emigrated to Los Angeles at the age of 16 and enlisted in the US Army for World War II. John's mother, Jacqueline, was the daughter of Jewish immigrants from Lithuania and Romania who had moved to New York.

His son has been married since 2000 to Jennica Zaharia, 15 years his junior, and who emigrated from Romania to the United States after her brother George, a track star, defected. They have two daughters, ages 21 and 19. Paulson filed for divorce in 2021, and she responded the following year with a lawsuit accusing him of hiding billions in secret trusts to which she would lose access after the divorce. This January, Paulson's lawyers argued that, if she wants to continue the legal fight, the wife must sue the daughters of the marriage, also beneficiaries of the trusts (as well as other relatives of the investor, 18 people in total). Zaharia says that she found out about the divorce petition by reading the New York Post.

The billionaire began his career as a salesman, but returned to New York University at the age of 21 to study Business; He then pursued an MBA at Harvard on a scholarship. At Boston Consulting Group he did research and advice to companies. He wanted to dedicate himself to investment, and signed with Odyssey Partners; He then moved to Bear Stearns, where he worked on mergers, and then to Gruss Partners, where he was a general partner. In 1994, he founded his own hedge fund, Paulson & Co, with $2 million and one employee. They were in offices rented from Bear Stearns. In 2003 his fund had grown to 300 million in assets.

Paulson & Co specializes in event-driven investments, that is, mergers, acquisitions, spin-offs… Play with arbitrage: for example, wait until a company announces that it is going to buy another, buy the target's shares, sell in short the acquirer's securities (unless it is an all-cash deal), and then earn the spread between the two prices when the merger closes.

The investor became famous in 2007 by shorting the US real estate market, as he bet against mortgage-backed securities by investing in swaps of credit default. In parallel, together with Goldman Sachs, he created the Abacus 2007-AC1 investment vehicle, made up of lots of low-quality mortgages.

The United States Securities and Exchange Commission, the SEC, sued Goldman and Paulson in 2010 for designing and selling a product linked to real estate that was, secretly, destined to fail and from whose failure the group itself was going to benefit. a handful of investors. Paulson escaped prosecution because his company maintained that it was always transparent about its view of securitized mortgages and that the assets were not risk-free. Goldman settled out of court, paying the SEC and investors $550 million.

Gold is another of Paulson's favorite and successful investments, who has also had failed bets, such as Bank of America or Citigroup. In 2020, Paulson announced that he would return capital to investors and convert his hedge fund into a family office.

In recent years, he has invested in luxury real estate in Puerto Rico, in partnership with Fahad Ghaffar, of Pakistani origin. In September, he filed a lawsuit against Paulson, accusing him of tricking him into investing in a high-end car dealership. Paulson then returned the lawsuit, blaming Ghaffar for diverting more than $3 million to live the good life. Perhaps at the end of the year this concern will take a back seat.

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