It looks like John Paulson and other hedge fund giants may get what they want as prospects wane for a Fannie Freddie overhaul bill to reach the Senate floor after a narrow banking committee vote last week. Did hosting a fundraiser for Senate Minority Leader Mitch McConnell in mid-March contribute to the current stall?
Paulson got rich betting the housing market would crash while using the same trading instruments that played key roles in the financial meltdown (remember collateralized debt obligations and credit default swaps?). So arguably Paulson helped devastate the economy gambling with mortgages, and now he’s betting on the housing market's recovery, even encouraging Americans to buy a home or two. But his investment in Fannie and Freddie has been at risk as the Senate considers legislation that would liquidate both entities and set up a new structure.
Paulson wants his payout before Fannie and Freddie are dissolved. Perhaps that's why shortly after Senators Tim Johnson (D-S.D.) and Mike Crapo (R-Idaho) introduced a revised version of the bill on March 11, Paulson hosted a fundraiser for Senator McConnell in New York City. McConnell's first quarter filing, provided by the Federal Elections Commission, shows Paulson & Co was paid $441 for catering on March 19. Thirteen Paulson & Co executives, including John Paulson, gave McConnell $44,600 on or around March 13, mostly in maximized checks of $2,600.
Perhaps Paulson wanted to make sure that McConnell, who has repeatedly blamed Fannie and Freddie for the financial crisis, understood Paulson’s investment in these institutions. Luckily for Paulson, progressive Democratic Senators are concerned the bill does not do enough to meet the needs of middle-income borrowers. Plus Koch-funded tea party groups have been on the attack to block the bill.
Recently named one of the wealthiest hedge fund managers in America, Paulson and his political maneuvering unfortunately exemplify Gilens and Page’s findings that average people are not heard in Washington unless rich people are talking also.