John Paulson Talks Fannie Mae Reform

Hedge-fund manager John Paulson, who made a fortune betting against the U.S. housing market before the crisis a decade ago, was a big fan of Donald Trump when he was running for president and remains a big fan despite the controversies swirling around the White House these days.

Freddie and Fannie

John Paulson On Freddie And Fannie And His Tip For Trump Supporters Living In New York: Stay Calm

[REITs]

Q4 hedge fund letters, conference, scoops etc

Transcript

Yeah it’s unfortunate that people think that you know somehow.

Protecting shareholder rights is asking for a favor. You know Freddie and Fannie first of all the largest financial enterprises in the world larger than any other U.S. financial institution. Every single U.S. financial institution that required federal aid or went bankrupt every single one has been restructured. The only companies that are still left over ten years after the financial crisis that haven’t been restructured are Freddie and Fannie.

Now who’s benefited from this. The government put in 185 billion of senior preferred. And today they have taken out two hundred eighty five billion in dividends. It’s the largest financial gain in U.S. history.

And you know it’s about five times greater than the gains on all the other financial restructurings they did. Meanwhile the former preferred holders and we are former preferred as the total preferred is 30 million billion.

So one tenth the amount of dividends the Government’s taken out. They have not received a dividend in 10 years and trade it more or less 25 cents on the dollar. So the public preferred holders are not rolling in the dough here have been severely impaired. Plus the dividend on the public preferreds are not. Q So you haven’t got a dividend in 10 years. You’ll never get any of those dividends. Regarding the comment the comment peaked at ninety dollars a share it today trades at a buck eighty. And in addition to the government owning 185 senior preferred they also own 80 percent of the comment. So to the extent that any of the public common shareholders would benefit whatever the public makes the government makes four times as much.

Cheryl there’s been so absolutely destroy the Collins down 98 percent preferreds haven’t had a dividend in 10 years. Firms are one tenth of the value the government preferred. So there is a hope that since the government got so much back that they will recapitalize Freddie and Fannie and allow the shareholders to receive what they deserve and what every other Sherill and every other financial prize has received. But you should know whatever the shareholders the common gets the government gets four times as much. So it’s not it’s not that the government is going to be doing something for shareholders. Ideally they’ve been doing something for themselves. And as a result of that you know the shareholders will benefit in a small way.

Right. Question three is a two part question. When you want an opinion on an investment or a situation and you want to find that opinion outside of Paulson funds who is your call.

Well obviously depends on you know what the investment is and who else is involved in the investment.

But we’ve been you know I started at Bear Stearns in 1984 before I started to bear. I worked at Odyssey partners with Jack nationally and Levy and went to Harvard on a Goldman Sachs scholarship. I say that because I have.

You know relationships fall through Wall Street. So generally you don’t have a policy that you don’t want to burn bridges if you go. You want to make you know keep. Make new friends but keep the old. So I’ve tried to stay in touch with people at every firm might work. And so I have a rather extensive network of financial contacts in Wall Street. You know most of the senior executives are CEOs at the major investment banks and I know most of the principals at the major private equity companies you know whether it’s KKR or Apollo or. You know and I know Blackstone, BlackRock, most of the people and most of the hateful. So I would say that you know and over time I’ve invested with almost everyone we’ve had co-investment together we’ve been partners in various transactions we’ve been on boards together so I feel pretty comfortable talking with most heads of hedge funds, private equity or banks depending on what the particular transaction is.

Got it. And part of that is if you could only invest in one outside hedge fund whose would it be.

You know I like Paul Singer, Elliott has a great track record.




About the Author

Jacob Wolinsky
Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Prior to ValueWalk, Jacob was VP of Business Development at SumZero. Prior to SumZero, Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and three kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own 2.5 grams of Gold