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View Full Version : A rip-off artist is 'doing God's work'



Norman Bernstein
06-05-2015, 08:59 AM
When it comes to money, even despicable sleazeballs can come out looking like they are noble.

If this doesn't make you puke, nothing will:


The good people of Dusseldorf, Germany, and specifically the IKB Bank, which specializes in loans to small and medium-size businesses, has kindly endowed Harvard University's engineering school with a gift of $400m. Harvard President Faust announced the endowment on June 3, the most generous in the University's history. Strangely, though, the Harvard Engineering School was renamed after hedge-fund manager John A. Paulson, not IKB, and thereby hangs a tale.

You see, the gift by Dusseldorf was not made in its own name. In fact, the money en route to Harvard was taken from IKB through an infamous swindle.

Back in early 2007, before the 2008 financial crash, hedge fund manager John Paulson approached Goldman Sachs with the idea of ripping off unknowing investors to the tune of $1 billion. In essence, Paulson would assemble a $1 billion portfolio of toxic assets (known as Abacus) that Goldman Sachs would market to its unsuspecting clients. Paulson would bet against the portfolio, so that the investors' $1 billion loss would be Paulson's gain. Goldman would pocket some fees for its service in this treachery against its own clients.

As planned, the $1 billion portfolio of securities collapsed in value soon after IKB (with its $150 million purchase) and other hapless investors bought in. Paulson walked away with $1 billion. Goldman got paid its fees. IKB lost its investment, collapsed, and was bailed out by the German taxpayers.

When the Securities and Exchange Commission got wind of this duplicity, it charged Goldman Sachs with financial fraud, in a complaint (http://www.sec.gov/litigation/complaints/2010/comp-pr2010-59.pdf) that details the timing and particulars. A few months later, Goldman settled (https://www.sec.gov/news/press/2010/2010-123.htm) with the SEC by paying a fine of $550 million.

Paulson, strangely enough, was not charged by the SEC, and walked away with the ill-begotten $1 billion. In a Wall Street community that prizes money far above honesty, Paulson was hailed for his genius in the deal. He was the toast of the town. Goldman's CEO Lloyd Blankfein, for his part, was so satisfied following the onset of the financial meltdown that he boasted that he was doing "God's work." (http://www.businessinsider.com/lloyd-blankfein-says-he-is-doing-gods-work-2009-11?IR=T)

In giving away the money of the German people, Paulson did not display any evident acknowledgement of the true nature of his ill-gotten gains. Nor did Harvard make a fine point of the matter. The Harvard Business School Dean described Paulson as "the epitome of a visionary leader." (http://news.harvard.edu/gazette/story/2015/06/harvard-receives-its-largest-gift/) The Romans used to say of ill-gotten lucre, "pecunia non olet" ("money doesn't stink").

Note that Paulson only turned over to Harvard less than half of his ill-gotten windfall from the Abacus fraud, $400 million of $1 billion. He has pocketed the rest, plus billions dollars more that one reasonably suspects have a similar origin.

S.V. Airlie
06-05-2015, 09:01 AM
It's God's will!

ahp
06-05-2015, 10:44 AM
If true, Harvard should reject the gift, but will they?

If they don't, given that they have an enormous endowment, and growing even larger, could Harvard reduce its tuition to zero? Would they?

Norman Bernstein
06-05-2015, 11:05 AM
If they don't, given that they have an enormous endowment, and growing even larger, could Harvard reduce its tuition to zero? Would they?

Harvard's endowment is tens of billions, and I bet they could easily forgo tuition and fund every student right from the endowment earnings. However, they support a wide variety of programs, which they probably feel are a more worthwhile expenditure of the money. Whether it's true or not, is probably a matter of opinion.

Then again, I'm willing to bet that a large proportion of Harvard freshmen are probably the recipients of all sorts of scholarship money, based on their obvious academic achievement.

I went to a blue collar school, myself: Northeastern University, a very good engineering school that gets very little respect. As I recall, tuition was something like $1650 per quarter (1969-1974, based on a four quarter academic year, in which you went to school on average, 2 quarters per year in a 5 year program).

Tuition now: $22,310 per term.

For Harvard:


The total 2015-2016 cost of attending Harvard College without financial aid is$45,278 for tuition and $60,659 for tuition, room, board and fees combined.

Whew!

Paul Pless
06-05-2015, 11:06 AM
I believe that Harvard, along with a few other prestigious schools, has made a commitment to graduate all of its students debt free.

Norman Bernstein
06-05-2015, 11:08 AM
I believe that Harvard, along with a few other prestigious schools, has made a commitment to graduate all of its students debt free.

Perhaps... but at over 60 grand per year, it would be pretty easy to deplete a family's economic resources, just short of going into debt.

Besides, if there are ANY students likely to be able to repay college loans after graduation, it's Harvard students.... the students who need a 'debt free' education are the ones going to East Bumf#$k Community College!

S.V. Airlie
06-05-2015, 11:10 AM
My brother had two kids at Yale at the same time!

Norman Bernstein
06-05-2015, 11:12 AM
My brother had two kids at Yale at the same time!

Costs more than Harvard:


The total Cost of Attendance for attending Yale in 2014-2015 is $63,250, which includes tuition ($45,800), room ($7,800), board ($6,200), and books and personal expenses ($3,450).

Keith Wilson
06-05-2015, 11:15 AM
Take the money. Remove the SOB's name.

Norman Bernstein
06-05-2015, 11:16 AM
Take the money. Remove the SOB's name.

The $400M is probably conditional on the name. An ego as big as his needs feeding.

Keith Wilson
06-05-2015, 11:25 AM
OK. Keep the name, and put a plaque explaining exactly what a schmuck he is everywhere the name is displayed, also on the website, in the catalog, in the freshman orientation materials, everywhere. Make him a household word like Benedict Arnold, Vidkun Quisling, or Judas Iscariot

TomF
06-05-2015, 12:49 PM
Here I thought the thread was gonna roast one of the throng of hypocritical Church leaders out there. Who knew we should look to Goldman's CEO for authoritative instruction on "God's Work."

Were I part of the Harvard decision-making community, I'd take the money ... and focus the benefits in programs/scholarships about business ethics and responsible consumer advocacy.

Peter Malcolm Jardine
06-05-2015, 01:04 PM
As for American university tuition costs, it's quite simple. The American education system has no interest in providing equal opportunity for a university education to all. It is a class driven system, from the elementary system on up. If Americans wished to change it, they would. They don't.

Norman Bernstein
06-05-2015, 01:07 PM
As for American university tuition costs, it's quite simple. The American education system has no interest in providing equal opportunity for a university education to all. It is a class driven system, from the elementary system on up. If Americans wished to change it, they would. They don't.

That might be a bit harsh, but it's not without its truth. The best example: Legacy admissions... how else did George W. bush wind up in Yale?

TomF
06-05-2015, 01:08 PM
Sorry,
I'm on the other side of the fence......Would you feel the same if this
dyck head had taken your life saving?

I think not.
yup, money don't stink............does it?????????It's gone. The story essentially says that my life savings would be unrecoverable. I'd feel vastly angry, but apparently there was nothing illegal at the time ... so his horribly unethical behaviour can't be prosecuted.

Given that, a next-best option to pay it forward is to use the endowment to try and create people who'd do utterly the opposite, when they find themselves in business.

Norman Bernstein
06-05-2015, 01:13 PM
I'd feel vastly angry, but apparently there was nothing illegal at the time ...

You have hit the proverbial nail on the head. In a sensible country, with appropriate legislation and regulation, Goldman Sachs would be held to the standard of fiduciary responsibility, i.e., NEVER knowing selling crap to its customers that they KNOW will circle the toilet bowl....

....yet we do NOT require fiduciary responsibility of firms like that. In essence, we've given them a license to behave immorally and unethically, if it benefits their bottom line.

bob winter
06-05-2015, 01:52 PM
That comment by the Harvard Business School dean is very telling. "Visionary leader"? A bad joke.

Paul Pless
06-05-2015, 01:53 PM
That comment by the Harvard Business School dean is very telling. "Visionary leader"? A bad joke.400 million buys a lot of love

Norman Bernstein
06-05-2015, 02:00 PM
400 million buys a lot of love

...as well as a brand new engineering campus, with one's own name on it.

skuthorp
06-05-2015, 05:22 PM
As for American university tuition costs, it's quite simple. The American education system has no interest in providing equal opportunity for a university education to all. It is a class driven system, from the elementary system on up. If Americans wished to change it, they would. They don't.
And it's gone well down that path in Aus as well.