George Soros and other hegde fund billionaires finally forced to answer some questions.

Geroge Soros the money behind the purchase of California law, such as Prop 215, the medical marijuana scam, and 36, the get out of jail free card, was forced to testify before the house oversight committee. Soros lost his most recent bid to legalize drugs in California, as Prop 5 went down in flames!

George Soros, Jim Simons, John Paulson, Philip Falcone, and Kenneth Griffin are sworn in. Photograph: Tim Sloane/AFP/Getty

America's top hedge fund managers staunchly defended the conduct of their secretive, high-risk industry yesterday and warned Congress that knee-jerk regulation could push financial jobs across the Atlantic to London.

In a rare day of public scrutiny, the billionaire bosses of five leading hedge funds appeared before the house oversight committee to answer charges that their unregulated bets on financial markets have destabilised the global economy.

George Soros, Kenneth Griffin, Philip Falcone, Jim Simons and John Paulson - who have an estimated combined wealth of $29bn (£20bn) - faced grilling over their low rate of tax and their funds' minimal level of transparency.

They expressed a willingness to disclose more information about their investments to the securities and exchange commission but insisted that any such data must remain shielded from the public gaze.

Griffin, whose Chicago-based Citadel Group manages more than $20bn, told lawmakers that public transparency would be "parallel to asking Coca-Cola to disclose their secret formula to the world".

The 40-year-old added that periods of regulatory uncertainty had undermined the US's competitiveness with Britain: "It breaks my heart when I go to Canary Wharf and I look at thousands and thousands of jobs in London in the derivatives market which belong in America."

The hearing, part of an investigation into oversight of hedge funds, became tense at times when the billionaires were quizzed about their personal wealth. Elijah Cummings, a Democratic congressman, said a neighbour had accosted him to ask: "How does it feel to go before five folks who've got more money than God?"

Cummings called on the witnesses to explain why their income is often taxed as capital gains at 15% - below the rate paid by a "schoolteacher or a plumber".

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http://www.guardian.co.uk/business/2008/nov/14/useconomy-investmentfunds

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America's top hedge fund managers staunchly defended the conduct of their secretive, high-risk industry yesterday and warned Congress that knee-jerk regulation could push financial jobs across the Atlantic to London.

In a rare day of public scrutiny, the billionaire bosses of five leading hedge funds appeared before the house oversight committee to answer charges that their unregulated bets on financial markets have destabilised the global economy.

George Soros, Kenneth Griffin, Philip Falcone, Jim Simons and John Paulson - who have an estimated combined wealth of $29bn (£20bn) - faced grilling over their low rate of tax and their funds' minimal level of transparency.

They expressed a willingness to disclose more information about their investments to the securities and exchange commission but insisted that any such data must remain shielded from the public gaze.

Griffin, whose Chicago-based Citadel Group manages more than $20bn, told lawmakers that public transparency would be "parallel to asking Coca-Cola to disclose their secret formula to the world".

The 40-year-old added that periods of regulatory uncertainty had undermined the US's competitiveness with Britain: "It breaks my heart when I go to Canary Wharf and I look at thousands and thousands of jobs in London in the derivatives market which belong in America."

The hearing, part of an investigation into oversight of hedge funds, became tense at times when the billionaires were quizzed about their personal wealth. Elijah Cummings, a Democratic congressman, said a neighbour had accosted him to ask: "How does it feel to go before five folks who've got more money than God?"

Cummings called on the witnesses to explain why their income is often taxed as capital gains at 15% - below the rate paid by a "schoolteacher or a plumber".

Paulson, who personally scooped more than $3bn last year when his fund bet against sub-prime mortgages, said the comparison was unfair. "If one of your constituents, whether they're a plumber or a teacher, bought a stock and held that stock for more than a year, they would pay a long-term rate of capital gains tax."

Several times Soros broke ranks with his colleagues to adopt a more accommodating line. The Hungarian-born financier, who proposed the establishment of a not-for-profit credit-rating agency to scrutinise derivatives, said he would have no objection to paying a standard rate of tax on all his income: "I agree to it. I've no problem with it."

The 78-year-old, who is famed for betting against sterling on Black Wednesday in 1992, said he was open to greater oversight to ensure that banks and hedge funds do not use excessive leverage by borrowing too heavily on their assets.

Soros said the financial crisis had exposed flaws in the present regulatory approach: "The fact that Lehman Brothers was allowed to declare bankruptcy in a disorderly way really caused a genuine meltdown in the financial system - a cardiac arrest."

The hedge fund managers told Congress that they owed their profits during a downturn to hard work and detailed research that turned up evidence that US mortgages were overvalued. Simons said credit-rating agencies were the most culpable financial players in failing adequately to scrutinise mortgage-backed securities: "They allowed sows' ears to be sold as silk purses."

The witnesses remained unapologetic about the scale of their personal earnings, insisting that the hedge fund industry provides liquidity and "outside-the-box thinking" to the financial markets.

Falcone, who made millions by taking short positions in banks, said he was the youngest of nine children in a working-class Minnesota town, with a father who never earned more than $14,000 a year.

"I take great pride in my upbringing," said Falcone. "Not everyone who runs a hedge fund was born on Fifth Avenue - that is the beauty of America."

The men with "more money than God"

THEY are the five best paid hedge fund managers in the world. Between them, they earned US$12.6 billion ($19.10b) last year. This, at a time when the financial world was beginning to melt down.

r George Soros, Mr Kenneth Griffin, Mr Philip Falcone, Mr Jim Simons and Mr John Paulson were hauled before the US Congress yesterday and assailed over their huge salaries, their tax perks and their contribution to the credit crisis that has engulfed the globe.

The men, however, declared themselves innocent of causing the market meltdown, The Independent reported.

One Congressman, Democrat Elijah Cummings disagreed. He said: 'These five citizens have more money than God.'

Here are their stories...


George Soros, 78
Soros Fund Management
Paid last year: US$2.9 billion

Famed as 'the man who broke the Bank of England', after netting more than US$1 billion by betting the pound would fall out of the Exchange Rate Mechanism in 1992, Mr Soros has attacked unfettered free market capitalism as being at the root of today's crisis.

With an estimated current net worth of around US$9 billion, he isranked by Forbes as the 99th-richest person in the world.

In 1997, during the Asian financial crisis, then-Malaysian Prime Minister Mahathir Mohamad blamed Mr Soros for undermining South East Asian economies by destabilising their currencies, and famously called him a 'moron'.

But in 2006, Mr Mahathir Mohamad met Mr Soros and said he accepted the latter was not responsible for the 1997-98 Asian financial crisis.


Jim Simons, 70
Renaissance Technologies
Paid last year: US$2.9 billion

The world's most expensive hedge fund manager, he is considered a mathematical genius. He charges clients 5 per cent a year, plus a whopping 44 per cent of returns beyond a certain level. His fund runs 'black box' programmes that harvest tiny profits from millions of automated trades.

Renaissance's Medallion Fund - which uses computers and trading algorithms to invest in world markets - returned more than 50per cent in the first three quarters of last year.

For all of his achievement and material success, Mr Simons' life has been beset by the kind of tragedy that few parents can fathom - the death of not one but two of his five children in separate accidents.

In 1996, his son Paul, 34, was struck by a car and killed while riding a bicycle near Mr Simons' home in Long Island, New York.

In 2003, 24-year-old son Nick drowned while on a trip to Bali.


John Paulson, 52
Paulson & Company
Paid last year: US$3.7 billion

Having run an obscure fund for 14years, he last year made what rivals called 'the greatest hedge fund trade of all time'.

As a result, Mr Paulson traded up in the Hamptons, the upstate playground for New Yorkers, and bought a lakeside compound for US$41million.

The Financial Times says he is the one figure who correctly identified the growing bubble in the US housing market.

His best-performing credit fund was up almost 600 per cent last year. That, in turn, made him the highest-earning hedge fund manager, with pay of US$3.7 billion, according to Alpha magazine.

A sharp-suited New Yorker with a taste for luxurious homes and a penchant for quoting Winston Churchill, he lives in a 2,600 sq m five-storey townhouse on New York's Upper East Side built in 1916.


Philip Falcone, 47
Harbinger Capital Partners
Paid last year: US$1.7 billion

Born in Minnesota, he was the youngest of nine kids who grew up in a three-bedroom home in a working-class neighbourhood.

His father is a utility superintendent who never made more that US$14,000 a year, while his mother worked in the local shirt factory.

Mr Falcone went to Harvard where he received an AB in Economics in 1984. After college, he went on to pursue his first love, hockey, although an injury cut short a professional hockey career abroad.

He made his fortune trading junk bonds in the '80s. His firm was founded in 2001 and made another fortune last year betting against sub-prime mortgages. His two funds boasted 114 and 176 per cent returns in 2007.

Dubbed the Midas of Misery by BusinessWeek, he made tens of millions of dollars on an earlier wager that Bear Stearns and other financial stocks would collapse.



Ken Griffin, 40
Citadel Investment Group
Paid last year: US$1.5 billion

Last year, it looked as if he would become one of the world's biggest financial players after buying up many distressed funds, banks and brokers. Now he is fighting to save his fund after losing 35 per cent of it this year.

Mr Griffin began in 1987 by trading convertible bonds as a sophomore from his Cabot House dorm room at Harvard University with US$265,000 from his mother, grandmother and two other investors.

He lives in a penthouse in Chicago that he bought for US$6.9million in 2000.

In 1999, he bought Paul Cezanne's 'Curtain, Jug and Fruit Bowl' for US$60.5 million, the most ever paid for one of the French Impressionist artist's paintings.

He keeps a row of management- theory books on a credenza behind his desk, and he says he tries to emulate one of America's most celebrated business leaders, former General Electric Co. CEO Jack Welch.

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