Some of loudest howls of protest over President Obama’s economic recovery plan came from hedge fund managers who will lose the unbelievably favorable tax treatment they have enjoyed on “carried interest” gains in the funds they manage. In a previous post“Tears for Hedge Fund Gurus” I noted that these geniuses get capital gains treatment (i.e., 15% tax rate) with no capital of their own at risk. The kind of deal that John Q. Public never sees.
Now its our turn, and the “Toxic Asset” investment plan announced today is the vehicle for we, the people, to DEMAND our “carried interest” in the mortgages that will be scarfed up by – surprise! surprise! – those same hedge fund managers for, potentially, enormous gains. Hedge fund managers will enjoy a 6-to-1 leverage on their investments in the form of low-rate financing from the Treasury (read: taxpayers). Sure, taxpayers may see gains on the principal amount invested by the Treasury in the toxic assets, but let’s play the hedge fund managers’ game and also get a 5 – 10% carried interest in the TOTAL amount invested (public and private funds). What’s good for the goose is good for the gander; its our tax dollars that are pulling the banks’ chestnuts out of the fire, and no reason we should not enjoy a Wall Street Greedhead’s return on our risk. The People’s Carry. It’s about #*!!@ing time!! Are you listening, President Obama?