Carried Away

, Why is the President allowing the billionaire bad boys club to win this one?
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Two words:
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Chuck Schumer

Why is the President allowing the billionaire bad boys club to win this one?
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Two more words:
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George Soros

Ha ha. I agree with both jay and newfreedom equally for once!

Two more words:

Larry Summers

“Why is the President allowing the billionaire bad boys club to win this one?”
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George Soros, Marc Lasry, Glen Hutchins, Al Gore among a long list of others.
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If their taxes go up (income down) their will be less to support Team Donkey. Not to mention that those based in NY will look for confines where state,local and city taxes are lower not to mention lower rent. All of which will make Chuckie Schumer sad

I have a recurring nightmare about George Soros crawling up my leg with a knife in his teeth. He wants to sap and impurify all of our precious, authentically American bodily fluids.

Some hedge fund managers are Republicans! Like Steve Cohen of SAC.

Seems pretty unlikely. You know, you weaken the super Conspiracy Power if you use the villain indiscriminately. Buffet, yes, although he has spoken out against it. But the beneficiaries are mostly billionaires you haven’t heard of.

I mean I get this is just chaff, and all, but why go out of your way to make no sense? This deal applies to fund managers who are managing other peoples money, on the 2 and 20 rule.
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It’s like bringing up Summers. I suppose you could say, like Schumer, that he’s a captive of the hedge fund managers, but getting a big fee from Goldman doesn’t really relate to that. I really doubt the interest carry rules apply to partnership shares or associate bonuses. And, of course, it wouldn’t affect Summers directly. Perhaps the guy managing the Harvard endowment when he was president, but my recollection was that he was paid below market–and probably not 2 and 20.

Actually there is a difference. While someone like jayackroyd would like to take away all of the mega rich’s money and redistribute it to those without for no reason other than social justice. I on the other hand do not have a problem with the mega-rich so long as they are not using their money like George Soros does to not only influence our government with his mega billions, but to also destroy countries as well. Then the penalty for doing so should be to make them part of the mega-poor of the world. To set an example of them that despite being the 35th richest guy in the world, he should be treated the same as any other world terrorist. Jailed.

Jay: I only brought up Summers as a defender of the established order, not as a direct beneficiary.

New: Jay isn’t making a radical redistribution of wealth argument here and neither am I. We just don’t think that hedge fund performance fees, which are, in effect, bonuses, should be taxed as risk capital.

Don’t you, as a conservative, agree with us that the government should treat all citizens equally? The taxation of my pay and annual bonus are taxed as income. How come a hedge fund manager can have their bonus taxed as a capital gain when mine is income? Isn’t that unfair?

Ack, I misread you.

Remarkable! Soros is the answer to all questions.

Rusty, would it absolutely kill you to try to make sense?

Schumer has really ticked me off on this. It really is all on him. If he came out against this special treatment, given that so many of his (and Lieberman’s) constituents benefit (“many” being “hundreds”), and given his position in the caucus, this could be a populist win for the Democrats instead of yet another tired illustration of how they put the banksters ahead of the customers and the taxpayers.
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And, of course, Joe and Ignatius both know how large a role Schumer has played in this. It would be simple enough to name a name….

MM.
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Don’t you, as a conservative, agree with us that the government should treat all citizens equally?

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The contemporary conservative view is that capital income should be taxed at lower rates than wage income. The justification for that is hard to follow–or, rather, it is said to have to with job creation, but empirically we know that claim is false. Nor is it easy to see how Warren Buffet paying tax at a lower rate than his secretary generates jobs; he (and this class of taxpayer) is not building factories with his income.
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It seems like a bad policy and a bad political strategy for the Democrats to take the conservative position on this issue. And yet…..

Here is a better question. Why do we even have a separate tax rate for capital gains? And why is it so much lower than what wage-earners pay?

We all know that, if Obama and the Democrats raised taxes on the wealthy, Wall Street would throw a fit and toss billions into campaigns to force them out.

Imagine if Democrats actually listened to objective economists, and pushed for a truly bold, truly progressive taxing and spending system (e.g. 40% marginal tax rate at $1M+ and 45% at $10M+; capital gains taxed at the same rate as wage income; a tiny financial transaction tax; 50% cuts in defense spending; closure of corporate tax loopholes; massive fiscal stimulus spending on infrastructure and next-generation technologies). The economy would enter into a period of such pronounced economic growth that Democrats couldn’t lose no matter how much Wall Street spent in opposition.

It is truly sad that most Americans don’t grasp — or don’t grasp to the fullest extent — that such an opportunity is being denied to us.

While I disagree with the favorable tax treatment of capital income, I think that’s really a whole different argument.

Say I’m a hedge fund manager and I have 2 ways of getting. First I get paid 2% of assets and 20% of profits. Those are my (or my team’s) wages for running the fund. That should be taxed as wages.

BUT, the conservatives will say, “these people eat their own cooking and put their own money at risk in the fund. Those profits should be treated as capital gains!”

Well, I’m fine with that. My second way of getting paid is for the value of my shares to go up and for me to dispose of them at the new, higher value. That money should be taxed as a capital gain, because that’s what it is it.

The only capital that can be taxed as a cap gain is the money the hedge fund manager has invested in the fund. The 2 and 20 is compensation for doing the job of running it.

If we’re going to tax cap gains and income at different rates then we have to stick to reasonable definitions of capital and wages. The 2 and 20 are wages. “Hey, will you run this fund?” “Why yes. For 2 and 20.” The manager’s return on their own invested shares? That’s capital. The two could only ever be the same thing if the manager owned 100% of the fund.

Yes. Even if you agree that capital income should be treated differently, it is hard to understand why the money received as management fees should be treated as capital income.
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There really is no good argument for this practice.
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There’s no good argument against START either. Odd that the coverage there has focused on the politics, not the policy, while here, it is the reverse. John Kyl is stopping START. There is no good reason for the special treatment of hedge fund managers, which apparently descended from the sky.

There is one broad argument. Capital is the source of labor income both jobs themselves, and higher productivity for wage earners, which translates into higher wages. If we, in effect, subsidize capital over wages, we will get a higher rate of capital formation, and a higher growth rate. This will benefit everyone, as productivity increases are reflected in wage growth, and in profits. (Productivity has two components, capital/labor ratio and technical change. Both benefit from capital investment.)
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There is a narrower argument–that individuals should not get to treat trading gains as investments, but should have their actual investments (in principle, in plant and equipment, ultimately) and so we should differentiate between real investments (held >6 months) and speculation. Likewise, because dividends are returns to investment, and are net of corporate tax (which is in principle assessed on shareholders), they should also be treated preferentially.
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The case for these arguments is much stronger in an open economy with relatively free competition. In the current environment of oligopoly and monopsony, the policy effect is a transfer from wage earners to capital holders. If the government was playing the role envisioned by liberals, like Adam Smith, then these monopolies would be broken up or regulated, and the case for treating capital income differently would be stronger. In a world without risk to capital holders, as with the banksters, further subsidy on the tax form makes no policy sense. But the larger failure is permitting the existence of a corrupt plutocracy; giving them special tax treatment is just gravy.
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It’s a little unseemly of them to demand the gravy too, especially now. But the Mr. Potters of this world do not balk at unseemliness, or even outright theft and fraud. (You do recall Potter stealing the money that wrecked George’s books, right?)

“Some hedge fund managers are Republicans! Like Steve Cohen of SAC”
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Some yes, but the hidden truth is that it is not only Republicans protecting HF it is Demos who get large amounts of money form them including Obama. It is just partisan populist nonsense. After the Clinton Admin there was a flood of Demos that ran to HF and PE funds to collect large sums of money before they ran back to the public trough.

I on the other hand do not have a problem with the mega-rich so long as they are not using their money like George Soros does to not only influence our government with his mega billions, but to also destroy countries as well.
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Please. Spare us the nonsense, Rusty.
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You don’t give a damn about billionaires influencing our government. Do you care about the Koch brothers pouring their money into campaigns? No.
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Nor do you give a damn about financial players “destroying countries”. Do you care about the investment banks that destroyed the economies of Iceland or Greece? Hell, no.
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And all Soros has ever been accused of is betting against countries when their economic houses were not in order. IOW, profiting from the arbitrage between what a country’s currency was being valued at and what it was worth. Unlike firms like Goldman Sachs, which have actively undermined the economic health of various nations, Soros merely acted as an observer who made successful bets. Capitalism 101.
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We know Soros’ real sin. He has donated money to directly to Democrats. And to a lesser extent, Republicans hate him because his Open Society protects people around the world from rapacious corporations, which reduces corporate profits.
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So, again, spare us your nonsense principles about why you don’t like Soros. It’s just partisan b.s.

So it seems like what we just hashed out is nothing but a proper interpretation of the existing tax code. It has nothing to do with rewriting any rules or redistributing any wealth. It would merely apply the current tax code in a reasonable and fair way to every worker in America, as opposed to the current interpretation which favors some workers (managers of limited partnerships) over others (including but not limited to, managers of Wall Street banks).

I’m confused as to why we’re being treated like radicial socialists about this.

“It’s a little unseemly of them to demand the gravy too, especially now.”
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What’s unseemly – more than a little – is that they’re demanding the gravy while insisting that all of their victims get less porridge, for no good reason whatsoever, other than sociopathic antipathy toward anyone but themsleves.

MM–
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It just lies, obfuscation and screaming. And it works. Absurd notions are treated as serious policy discussions. There have to be two sides, and if one side proposes nonsense (see Paul Ryan) or just shrieks flat out lies (“SS is insolvent” “Death panels” “Climate change is a fraud”) that’s unfortunate. But the story requires two points of view.
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That’s not the problem here. Here the problem is only one point of view. Nobody will defend the policy, but it just keeps on going, like mohair subsidies. http://www.politico.com/news/stories/0610/38379.html
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But if Ignatius and Joe won’t take the next step, and say, Chuck Schumer, with his chairmanship, his leadership and his constituents could end this inequity if he wanted to, then the voter is still left uninformed.

“Some yes, but the hidden truth is that it is not only Republicans protecting HF it is Demos who get large amounts of money form them including Obama. It is just partisan populist nonsense. After the Clinton Admin there was a flood of Demos that ran to HF and PE funds to collect large sums of money before they ran back to the public trough.”
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When are you going to get into your morally bankrupt head that unlike the hypocritical fringe that you dance around in, we don’t want ANY money in our political system when it comes down to it. You’re fine with money on your side but you wet your pants over Soros. We’re not you – you have no integrity and no moral fortitude.

No, shepherd, it’s not for no good reason. That’s where the money is. They’ve sucked the residential real estate tank dry and beyond, destroying the idea of the American Dream (which was at the heart of the “people won’t default, even though they are paying interest rates that say they will” story), and so all that’s left is the Social Security payment stream. And impoverished Domincan baseball prodigies.
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http://www.nytimes.com/2010/11/18/sports/baseball/18investors.html

To address your second point, IF we were to subsidize capital investment then, yes, it makes sense to distinguish between actual investment and short term speculation.
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But I have two initial objections.
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First, I dispute that a reduction in capital gains taxes spurs capital investment. People who have excess money need to put it SOMEWHERE. It may be something conservative like a treasury bond. Or it may me something aggressive like a venture capital fund. Or maybe someone will buy art or real estate. But, regardless, people will try to maximize their returns. And they will have to pay the cap gains tax, whatever it is. Lowering the tax rate is nothing but a windfall for cap gains earners.
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Second, even if a reduction in cap gains taxes DID increase capital investment, It would not be worth the necessary trade-off in demand. If you lower cap gains taxes then you need to make up the shortfall with higher wage income taxes. That puts less money in consumers pockets and reduces demand for goods and services.
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If I have a choice between an economy with higher demand or an economy with lower demand but a slightly cheaper source of capital, I’ll choose the former.

The discussion here is interesting, and it is just a miniscule representation of how in the end the tax system gets so screwed up to begin with. This scam of calling income “capitol gains” is why CPA firms and tax lawyers exist. And every time I see discussion of capitol gains taxes, it hurts because the only time I faced it on a large level it was 25%. That was during the Bush I term.

Yes

“we don’t want ANY money in our political system when it comes down to it. You’re fine with money on your side but you wet your pants over Soros. We’re not you – you have no integrity and no moral fortitude.”
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And yet you remain silent over the President and every Demo that takes money from people you say you don’t want any money. It seems you speak out out an orifice in the posterior part of your body and goes to the real truth that liberalism is morally bankrupt. Given us power we don’t care how even if its what we accuse the right of and even when we say we don’t like it. Lying, delusions, stupidity? All three?

We’re not you but yet you support those whose methods you despise. You can’t even be truthful to yourself

“No, shepherd, it’s not for no good reason. That’s where the money is.”
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What’s the good reason they need more of that?

“The 2 and 20 are wages”
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That is incorrect. These are income to the GP (General Partner). From this they pay marketing, audit, accounting, reporting ,legal, wages and taxes to employees (non-GP employees).
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This is not an issue solely to HF but also Private Equity funds. What no one considers is that most hedge funds are under $100 million in assets (well under) and before the populist bile starts the majority of new funds are started with their own money and that of family and friends. Investors, if they are smart what managers with skin in the game. It allows them to attract investors who invest alongside of them. The fund grows they hire people. A
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I would agree at a certain AUM (Assets under Management) it is less useful in growing the business than it is a tax-deferral vehicle. Changing the tax status of the funds at earlier stages would be another great way to stunt job growth.

What’s the good reason they need more of that?
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C’mon, Shep; distinguishing between ‘good’ and ‘notgood’ is so overrated – not to mention inconvenient – when it comes to our freedom to accumulate wealth.
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What do you have against freedom?

“Steven Rattner, the former head of Quadrangle Group LLC, will pay $6.2 million and accept a two- year ban from associating with broker-dealers or investment advisers to resolve a Securities and Exchange Commission probe of kickbacks in connection with the New York state pension fund. ”
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This is one of the Obama gang who was going to help drain the swamp. More lies from the left

“And yet you remain silent over the President and every Demo that takes money from people you say you don’t want any money. It seems you speak out out an orifice in the posterior part of your body and goes to the real truth that liberalism is morally bankrupt. Given us power we don’t care how even if its what we accuse the right of and even when we say we don’t like it. Lying, delusions, stupidity? All three?
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We’re not you but yet you support those whose methods you despise. You can’t even be truthful to yourself”.
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Just point out where I support money for anyone. Save yourself the anti-liberal dreck and go for the jugular. You don’t care – you just regret that gop didn’t stomp hard enough on liberals necks, you certainly never regret that they use the same methods you accuse liberals of. That’s the difference between you and I; at the end of the day I practice what I write for real – yours is just mental masturbation since it’s easier for you to hate liberals than stay true to your own sense of ideological purism.
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Kindy grow a pair of integrity before you question others.

Why is the President allowing the billionaire bad boys club to win this one?
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Because of how elections are financed and won in this country. Big money flows to pols that legislate the way the club wants. Allowing them to win this one (any elected that allows it, not only the pres) fattens election coffers, brings commercials and some cherry face-time on TV; confronting the club insures that your opponent will have these things.

“Don’t you, as a conservative, agree with us that the government should treat all citizens equally?”

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Yes, when they make the “playing field” itself equal as well. Now with our convoluted tax system, which has so many loopholes and various other ways for these people to get away with robbery, then no. I do not think they should get away with anything. I believe whatever the high tax rate happens to be, they should be taxed under it.
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Yes I have pointed out Soros, as he has been one of the big mega-billionaires who has played politics and distorted our political process. Are there other billionaires out there that have done as much? Such as the Koch Brothers? More than likely yes. They should ALL be stopped.

More on square1′s hero, George Soros;
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http://www.theblaze.com/stories/open-society-soros-explains-the-anti-capitalist-pro-marxist-tactics-he-uses-to-fundamentally-transform-countries/

I think Joe Klein has very little understanding of the financial world in general. I believe his reaction to Wall Street is much like the TPers to the current administration. It looks different, they don’t understand it, so they are going to stand against everything it does.
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I found it ironic a few months ago when he wrote “good riddance” to Wall Street and wished the “next generation of young American financial geniuses” to concentrate on how to build a productive economy here. That sounds so utopian, but how will these new businesses hedge against price fluctuations and credit risks without financial products? Should they not protect their profits and allow them to be affected by the whims of mother nature and/or economic events.
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You have also mentioned that you want derivatives taxed because the government should tax things it wants to go away like credit default swaps. Do you even understand what a credit default swap is? You do know that it can be a useful tool that allows a company to hedge against credit risks? Like any tool though, take a car for instance, it can be used wrong. It doesn’t mean we should tax cars out of existence and wish that all young car drivers would go back to equestrian ways. I’m all for better regulation, but I find your complete stand against everything financial short sighted and shallow.

I believe in the capital gains tax because of the risk the investor takes. With each investment the investor can see his money wiped out if not careful. The lower capital gains tax raises the reward thus promoting investment in the economy.
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I also believe there should be some sort of capital gains tax for entrepreneurs also. If you start a company than you are taking on more risk and the government shouldn’t tax you as high in order to promote economic growth.
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A corporate cubinite like myself is taking on very little risk and thus shouldn’t be rewarded.

“Just point out where I support money for anyone”
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Since you post daily deriding me and most people on the right for their lack o(fill in your hate de jour) and ZERO about the Dumos you are either approving of what they do or you approve that they are on your side and ignore the indiscretions. This makes …
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“at the end of the day I practice what I write for real”

a lie or a delusion. You just keep lying to yourself its the liberal way of life. Apparently there are no mirrors in your house

“Second, even if a reduction in cap gains taxes DID increase capital investment, It would not be worth the necessary trade-off in demand”
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I love the comedy routine that liberals go through to justify taxing anything that moves or exists.
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But I find it especially amusing how they can’t be honest enough to say spend or re-distribute but “trade-off in demand”.

“I think Joe Klein has very little understanding of the financial world in general.”
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That shouldn’t surprise anyone. Based upon what they’ve managed to accomplish over the past couple of decades, particularly the past few years, neither do the people who run it.

actually my comment is a reply to Free, who says the 2 and 20 is payment to the General Partner, which has expenses,etc.. I have a small business where I am paid directly by my clients (a percentage of what I generate) and I can deduct my business expenses against my income for tax liability purposes. If the fund manager is being paid by the partnership, then that is income for the fund manager, no? I am in the process of buying a small retail business. My accountant tells me I have to take out a “reasonable” compensation that is taxed as regular wage/income. Any profit, once removed from the business, is taxed at capital gains rate. So, how come fund managers have a different scenerio – all of their income is taxed as capital gains?And it gets increasingly complicated because different kinds of corporations are taxed differently than individuals, partnerships, etc. I don’t understand how you can say the 2 and 20 isn’t income for the person who receives it.

“you are either approving of what they do or you approve that they are on your side and ignore the indiscretions.”
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Lovely. And what you do is something else entirely, yes?

Joe Klein and everybody understands now what all of these financial maneuvers are: paper shuffling and exchanges which produce nothing except outrageous profit for the manipulators. We have learned the hard way. “Hedge against risks”? What a laugh. Shift the risk to dumb investors and take their money along with all the rest of the suckers who want to play a game of which they don’t know the rules. Equestrian ways? Wall St. is leading us there. Allow the one ring circus and sleight of hand to continue and we will all wind up under that tree outside where it all started.

No offense meant to circus performers who do, after all, usually provide a fair return for the price of the ticket.

“ZERO about the Dumos you are either approving of what they do or you approve that they are on your side and ignore the indiscretions. This makes …”
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It was not that long ago you and I argued about this where I expressed that I wanted ZERO money for anyone or any party in our system. So no. You’re the one who regret gop isn’t hardknock enough about sticking it to liberals and you couldn’t care less if they do exactly what you think liberals do.
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In other words – I’m not you no matter how hard you try and cry about it. You have ZERO integrity.

And this is circle-jerk more than three-ring-circus:
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http://www.bloomberg.com/news/2010-03-31/how-lou-lucido-helped-aig-lose-35-billion-with-cdos-made-by-goldman-sachs.html

“I love the comedy routine that liberals go through to justify taxing anything that moves or exists.”
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Yeah, it’s kinda funny. Unlike the pathetic joke of “conservatives” railing against “big government” but never managing to actually, you know, make it smaller.

Sigh…It’s interesting to see people on the left painting a whole industry with such a broad stroke of evil. It reminds me so much of the far right wingers doing the same to Obama, healthcare, etc. Neither understand what the heck they are talking about, but just pick the pieces that fit into their perspective of the world.
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Every corporation worth its salt uses some type of derivative. But, let’s tax the heck out of every financial tool and everyone in the industry anyway right?

“It was not that long ago you and I argued about this where I expressed that I wanted ZERO money for anyone or any party in our system.”
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Yes you talk about it (in paragraphs), if it involves a Republican but never a word about a Democrat. Note the lack of ANY liberal on the post about Rangel. If it was a Republican it would have 50 posts calling for their disembowelment

Hypocrisy pure and simple.
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Stop rolling your eyes. We are well aware that there are plenty of good derivatives out there.
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It is OBVIOUS that when people criticize derivative markets, they are talking about unregulated derivatives that often unnecessarily complex and which add no value to society. Do I need to state the obvious? Burger King hedging the price of commodities on the Chicago exchange is not the same as nontransparent, complex naked credit default swap trades between hedge funds and investment banks.
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But thank you for raising the trivial point that we should not stifle trades in pork bellies futures.

Well, new, I wonder how you feel about the Koch brothers. They are as wealthy as Soros and have had their hands and their millions of dollars involved in American politics for years.
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Oh, what am I saying. The Koch brothers are fighting Republicans so its ok. It’s only progressive-leaning or Democrats wealthy persons who aren’t permitted to be involved in politics.

47% of the partnerships involved in carried interest are real estate and the vast majority are owned by small businesmen who invested their own money to get the deals started. The reason people say they want to change the status of carried interest is that the general partner has no capital, only labour in the deal. That is simple not true for real estate. Typically the general partner was paid back his money with no interest if the deal went forward, because he relied on the rules in place. Not grandfathering in the old deals is grossly unfair. I believe this is an example of how the Obama administration has gone too far and they have their feedback.

“Yes you talk about it (in paragraphs), if it involves a Republican but never a word about a Democrat. Note the lack of ANY liberal on the post about Rangel. If it was a Republican it would have 50 posts calling for their disembowelment
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Hypocrisy pure and simple.”
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Considering that you mentioned Soros in those posts and I said that I didn’t want him to support our politicians with money, So no. And since there’s been plenty of blog posts about GOP without me asking for their disenbowelment, no. Again. I’m not you.

Oh, I see. It’s the old SMALL BUSINESSES are going to be hit canard again. Give it up, Rightie!

Actually, it’s been Chris Dodd who’s been out front on this.
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And Steve Schwarzman of Blackstone Group has been one of the most whiny about keeping it. A couple months ago he compared Obama getting rid of the carry rate to Hitler invading Poland.

Both George Soros and Warren Buffett are on record recommending raising the carried interest rate.
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Newfreedom is either lying knowingly or speaking ignorantly. Either way people shouldn’t pay any attention.

I know this is really really late. But, I finally got a browser that works well with wordpress so I now can easily look at my history.
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Square1: I didn’t say simple derivatives so please don’t put words in my mouth.
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Credit Default Swaps serve a purpose, period end of story. I have used them extensively in my job and I have never even traded in them. The pricing of CDS is a better indicator of a company’s credit than any rating by an agency.
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The fact that they were misused and were managed incorrectly is obvious to everyone and I am for smart regulation.
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However, I find fault in Klein’s broad stand against an industry. It’s a backward, knee jerk reaction to a situation that can be solved without throwing the baby out with the bathwater.