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.