In One Year, a Hedge Fund Manager Can Make Enough Money to Hire 100,000 New Teachers

http://blog.buzzflash.com/node/13240

01/03/2012 - 2:46pm

PAUL BUCHHEIT FOR BUZZFLASH AT TRUTHOUT

It's an exciting time for you guys. You know you can beat those hedge fund managers. You're better educated, you're ambitious and creative. Go for $10 billion. Or maybe, a few years from now, you'll be the first trillion dollar man!

Here's an example to motivate you. In just one year a single hedge fund manager made enough money to hire 100,000 new teachers while calling his $5 billion income "carried interest" so he could defer the little amount of taxes he owed.

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The financial sector, which made up 16% of domestic corporate profits in 1980, now makes up over 40% of those profits. The best and brightest graduate students aren't going into science or engineering or medicine anymore. They're going into finance. No sense making products when you can make bets on mortgage failures, using other people's money in case the bets go bad.

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You have Congress on your side, with its continued support for lower taxes on earnings that don't require any work, most of the gains going to the 20% of Americans who own 90 percent of the stocks. And you've perfected the art of financial subterfuge with illusions that would do a carnival magician proud:

- "Spring Loading": Timing a stock option to precede good corporate news.

- "Bullet Dodging": Timing a stock option to follow bad corporate news.

- Back-Dating: Changing the purchase date on a stock option to a time when the price was lower.

- 'Put' and 'Call' chicanery: Getting a tax credit for a stock loss without actually selling the stock.

- Real Estate rascality: Avoiding taxes on a property sale by calling it a loan.

Never mind that the SEC thinks a lot of this is illegal.

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