Selfish Altruism
Whenever I give money to charity the press always plays up the what's-in-it-for-Percy angle. I can understand, then, the frustration John Paulson must feel when, upon his hedge fund management firm donating $15 million to support groups giving legal representation to families facing foreclosure and financial ruin because of abusive subprime mortgages, the press focused on the fact that Paulson's firm stood to benefit from changes to the bankruptcy code being sought by the groups receiving the money. Here's Bloomberg:
The two non-profit organizations, the Center for Responsible Lending and the National Association of Consumer Advocates, said today that they would use the money to establish an institute that provides funding for legal assistance to homeowners fighting foreclosure. Kathleen Day, a spokeswoman for the Center for Responsible Lending, said none of the money from Paulson & Co. would be used for lobbying.
Day's group has pressed Congress to pass legislation allowing judges in bankruptcy cases to forgive mortgage debt that exceeds the value of a home. The change would further devalue securities based on home loans to borrowers with poor credit. Bets on rising subprime-mortgage defaults helped New York-based Paulson & Co. more than double its assets this year, to $21 billion.
"Losses would be realized much faster and they'd be larger," said Kyle Bass, managing partner of Hayman Advisors LP, a Dallas-based hedge fund that gained 149 percent this year making similar bets. "It would good for people who are positioned the exact same way I'm positioned."
Who cares about the whys and wherefores behind the donation? The important thing is that the money is being used to help people. It's no different than my support of groups working to curtail greenhouse gas emissions while building my uranium positions.
By the way, the Center for Responsible Lending is based in Durham, North Carolina and is headed by Greensboro native and 2005 Tar Heel of the Year, Martin Eakes. They do good work!
Good for Paulson & Co. As Percy notes, their donation goes to a very deserving outfit. And the legislation that the Center and NACA are supporting would be a very good thing for consumers, not just funds like Paulson's that were smart enough to predict the fairly predictable sub-prime bust!