Saturday, May 24, 2008

Children are the future, don't mind the broken toys

"Walk across any of the trading floors - they are full of 29-year-old kids," says Kenneth Griffin, billionaire hedge fund manager in the International Herald.

"The capital markets of America are controlled by a bunch of right-out-of-business-school young guys who haven't really seen that much. You have a real lack of wisdom."

On top of that, many chief executives of big universal banks, the ones that combine all sorts of financial services under one roof, "only understand a small part of the business," Griffin said, suggesting too many of them come from sales backgrounds. Put those two things together, the traders and the chiefs, and you have the making of an outright debacle.

So basically, the world is being run by sales guys and recent business school graduates. That should work out well. It already is, for a few at least:
Average compensation for the top 25 fund managers was $892 million in 2007, up 68 percent from the previous year. The minimum compensation included in the ranking was $210 million.

But what, if anything, should we do about it? Hey, I know, give them a tax break!
A simple calculation shows that this preferential tax treatment for the top 25 individuals alone costs the Treasury almost $2 billion.4 It serves to suggest that our estimates of tax losses are indeed conservative, as the losses from these 25 managers alone amounts to almost a third of our total.

...If the amount of tax revenue lost to private equity firm managers is equivalent to that lost with hedge funds, then the combined amount would be $12.6 billion. This forgone revenue stream could, for example, fully fund the five-year, $35 billion expansion of SCHIP, the public health insurance program for low-income children.

Health insurance for low-income children? Forfend! That would harm working families and low-income children alike. Fortunately public-minded lobbyists are on the case.
Defending this tax break are highly paid lobbyists such as Douglas Lowenstein and Grover Norquist who loudly and repeatedly make the claim that taxing hedge fund managers like everyone else will harm the average working family.

You see, we have to give the 29 year old recent business school grads and a few assorted sales guys billions or the working families and children of the poor gets it right in the choppers. Don't you care about the children?

And it's not all about filthy lucre or its cousin health care. These hedge fund managers do so much more good in the world. In addition to amassing vast fortunes while producing nothing, our young billionaires demonstrate their concern for working families though charity and, increasingly, political action.

For example, Mr. Griffin spends millions on his art collection and sometimes displays choice pieces where the public can see them. Right now he has a painting by C├ęzanne and a bronze sculpture by Edgar Degas on display at the Art Institute of Chicago. Working families everywhere feel the love. Isn't love worth more than mere money?

And as you would expect, the young billionaires overwhelmingly favor the Democrats, who are also well known for their devotion to working families and the poor.

Oh, I know, skeptics might conclude they are buying the Democrats (Republicans can be counted on to stay bought) to, as we say, "hedge" their bets. I don't know. I guess it's possible.