Hedge fund manager John Paulson, who earned billions of dollars last year by betting against the housing market, said on Tuesday that former Federal Reserve board chairman Alan Greenspan will advise his firm.
Greenspan, whose words can still move financial markets, will advise Paulson on the global economy for an undisclosed amount of money, the hedge fund said in a statement.
By joining the New York-based fund, Greenspan becomes the latest former Washington insider to work in the fast growing $2 trillion hedge fund industry. Former Treasury Secretaries Lawrence Summers and John Snow provide advice to D.E. Shaw and Cerberus.
Greenspan disclosed his decision to join Paulson & Co. in an interview with The Wall Street Journal. Paulson was among hedge fund industry's big winners in 2007 after it bet against subprime mortgages.
In that interview, Greenspan also said the U.S. economy is probably in a recession or about to slide into it.
The odds are "not overwhelming but they are marginally in that direction" Greenspan was quoted as saying in the interview, which was published on Tuesday.
Greenspan was reported in December as saying that he saw chances of a U.S. economic recession at around 50 percent, compared with his previous view of a 30 percent chance.
In the latest interview, Greenspan referred to a drop in the Institute for Supply Management's purchasing managers index as well as the rise in unemployment in December, and said the odds of a recession were still close to 50 percent but "more likely higher than lower."
Greenspan has been criticized by some for keeping the trendsetting federal funds rate at a low 1 percent from June 2003 through June 2004, which some say contributed to a housing bubble that is now bursting.