Tuesday, October 1, 2013

Donation to Yale: It’s Really Your Money

Charles B. Johnson just donated $250 million to his alma mater, Yale University[1].  Mr. Johnson was chairman of Franklin Resources, the holding company for a series of well-known mutual fund and institutional money management firms.  He is said to be worth an estimated $5.7 billion.  The gift to Yale is extremely generous and comes on top of many other sizable donations by Mr. Johnson to the university.  However, the donation is also a window into the extreme imbalances in our economy.

Canadian Preferred (2010)

You might expect that a man with $5.7 billion and the ability to donate $250 million would have invented some type of product or innovation that transformed the American or global landscape.   Mr. Johnson didn’t invent institutional money management or the mutual fund; he didn’t even start the company he managed, originally Franklin Distributors.  Rather, he inherited the company from his dad, and proceeded through a series of acquisitions such as Templeton, Fiduciary Trust and Mutual Shares to build a money management empire.  He also listed the company on the New York Stock Exchange (BEN), while maintaining family control of the business.  One of his sons now runs the company.

Don’t get me wrong.  A great deal of work went into constructing Franklin Resources, building up distribution, and integrating acquisitions.  However, the primary driver of Mr. Johnson’s wealth has been derived from the massive 25-year bull market in stocks and bonds and active money management fees.  These two factors gave Mr. Johnson and the shareholders of Franklin Resources a huge return.  Where did those fees come from?  They came from schoolteachers and civil servants enrolled in public pension plans.  They were deducted from your 401(K) balances.  In other words, your name should be on the buildings that will be constructed on the Yale campus. After all, it’s a chunk of your money that went into Mr. Johnson’s pocket because he was lucky enough to be sitting on the money manager’s side of the table during the greatest bull market in this country’s history.

When Mr. Johnson isn’t making donations to his alma mater, he is helping to fund the campaign committees and super PACs that dominate our politics, and ensure that he receives favorable tax treatment to protect his fortune.  It’s ironic that Mr. Johnson funds the very political causes that attack his alma mater as a member of the liberal elite.








[1] http://news.yale.edu/2013/09/29/historic-250-million-gift-yale-alumnus-largest-ever

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