NEW YORK—Famous hedge fund manager John Paulson and former Treasury Secretary Robert Rubin could not agree on a uniform outlook for the U.S. economy. Paulson and Rubin discussed their views at an event hosted by 92Y in New York City, Jan. 22.
“I think the U.S. economy is doing better,” said Paulson, who is particularly optimistic about the housing market. “It is well off the bottom and is showing a relatively strong recovery,” he said.
Paulson is the president and founder of Paulson & Co., a New York based hedge fund. Paulson is most famous for making $3.7 billion betting against the U.S. subprime mortgage market in 2008.
Rubin, a former Goldman Sachs senior partner and secretary of the Treasury for the Clinton administration has a more “troubled view.” “In my view at least, the recovery is going to remain slow,” he says, citing fiscal problems, sluggish business investment, and a consumer limited in spending power due to low job and wage growth.
Rubin Critical of Congress
Rubin was especially critical of the large fiscal deficit and thinks politicians lack the will to return the United States to fiscal prudence. “I think this was a tremendous opportunity for the system to come together to produce a comprehensive program,” he says about the fiscal cliff debate at the end of 2012 that resulted in an “inconsequential program.” “We avoid the disaster and do nothing positive to solve the problems,” is his conclusion.
In his function as a treasury secretary under President Clinton, he managed to return U.S. government finances to a surplus at the end of the 1990s, with the support of a booming economy. Right now, however, he admits to having “low faith in politicians.”
Paulson, who set the earnings record for hedge fund managers in 2010, grossing almost $5 billion, has more confidence in Washington. “People are afraid of the problems, but at the end of the day, they solve the problems. People were afraid of the debt ceiling, but now they passed legislation that extends it for three month. … Both sides of the aisle want to see job creation, they want to see more growth.”
Paulson’s very good track record was tainted in 2011, when he made several bad bets buying Bank of America, Citigroup, and Chinese company Sino Forest, which is now defunct after an accounting fraud scandal. His flagship fund Advantage Plus lost 52 percent that year, but recovered in 2012.
