You may not know who John Paulson is, but you soon will.

Last year, Paulson made $3 billion betting on foreclosures. That puts the Wall Street hedge-fund manager among the top 150 richest Americans. In one year, Paulson made more money than The Donald made in a lifetime, according to the Wall Street Journal.

To put Paulson’s payday into perspective, it would take the income of 62,500 Americans earning $48,000 annually to equal the loot he raked in last year.

Paulson made his money the old fashion way — he earned it. During the last housing slump, Paulson was a foreclosure investor, buying two distressed properties; a New York apartment and a large home in the Hampton on Long Island. Later, he joined Bear Stearns as a mergers-and-acquisitions investment banker. By 1994, he started his own hedge fund with $2 million and built it into a $500 million nest egg by 2002.

During the housing boom, Wall Street began repackaging mortgage securities into instruments called collateralized debt obligations, or CDOs, and selling slices of these securities to investors at varying levels of risk. Paulson believed that investors were underestimating the risk of the mortgage market, betting that the CDO market would crash.

In 2006, Paulson started another hedge fund solely to bet against risky mortgages. Meanwhile, Wall Street had started a new trading index to bet for or against subprime mortgages, called the ABX, which reflect the value of a pool of subprime mortgages made over a six month period.

He raised $150 million and bet against the ABX. In July 2006, the ABX index began with a value of 100, but it soon fell to 60 and Paulson’s profits began to pile up. As the more and more subprime mortgage giants tumbled throughout 2007, Paulson’s funds racked up even more gains.

“Mortgage experts were too caught up” in the housing boom,” Paulson told the Wall Street Journal. “I’ve never been involved in a trade that had such unlimited upside with a very limited downside.”

And things are looking even better in 2008 for the doomsday trading titan as real estate prices tumble and foreclosures spread like wildfires. Paulson is a bear when it comes to the housing market, claiming it will take years to recover.

Just goes to show you, for every crisis there are winners and losers.

Do you think Paulson earned his money or do you think it’s just plain luck?