Jan 19, 2012 21:45 UTC

A speech on taxes that would help Romney’s run

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By Daniel Indiviglio

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The following is an imagined speech that Mitt Romney could deliver to handle attacks on his private equity background and low personal tax rate while simultaneously appealing to moderate U.S. voters to help his run for the White House.

COMMENT

Low taxes on capital gains do not encourage investments. Reagan proved that with the 1986 Act when it equalized the tax rates for capital gains and ordinary income. The real justification for taxing investment income at lower rates than other forms of income is that those earning it contribute generously to campaigns.

The most common form of capital gain for the bottom 99% is from selling their house. The first $500,000 of gain already is exempt from tax. Few of the bottom 99% earn capital gains, anyways. FactCheck.org noted that over 80% of capital gains inured to and were realized by those earning $200,000+. See http://www.factcheck.org/2008/04/impact- of-capital-gains-tax-on-the-middle-class  /. Thus, saying you’ll eliminate capital gains taxes for the bottom 99% is a throwaway line.

And if this were done, it is inevitable that we would immediately see political pressure, backed by massive campaign contributions and “studies” from marketing shops masquerading as “think tanks”, to raise the threshold for taxing capital gains. And President Romney would support it.

Further, to the extent the Internal Revenue Code treatment of income creates incentives or disincentives, then taxing salaries and wages at higher rates than capital gains punishes working for a living. One need not ask whether that is sound policy.

BTW, Warren Buffet once proposed imposing a surcharge on short-term capital gains to discourage speculation. I suspect that short-term for Mr. Buffet is less than 10 years.

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Jan 12, 2012 22:23 UTC

Carlyle’s big payday does private equity no favors

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By Jeffrey Goldfarb

 The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Carlyle Group isn’t doing its industry any favors. As part of the private equity firm’s initial public offering process, this week it revealed the lucre reaped by its three founders last year. David Rubenstein, William Conway and Daniel D’Aniello took home a combined $400 million in cash payouts. That’s on top of their nearly $4 million salaries and the profits on $200 million of distributions on personal investments in the firm’s funds. Carlyle’s timing is impeccable.

Jan 12, 2012 14:43 UTC

Ferretti’s yachts find fitting berth in China

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By Quentin Webb
The author is a Reuters Breakingviews columnist. The opinions expressed are his own

Few companies embody the highs and lows of turbo-charged modern finance better than Ferretti. Once the luxury yachtmaker made a mint for private equity. Now a state-backed Chinese industrial conglomerate is buying it for at most a fifth of its peak value.

COMMENT

Ferreti’s yachts tells s atory of reality in the business world. Like a wheel, sometimes you are on top, at the peak; and sometimes you’re down. However, Ferreti’s yachts prove themselves when even in downfall, they try to stand back on top again in the hands of the Chinese. Impressive!

Nichelle from baignoire douche 

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Jan 12, 2012 11:24 UTC

Predictions 2012: Upside down and inside out

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By Robert Cole

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Planet finance has a propensity to turn itself upside down and inside out. It’s up to its old tricks again. A new collection of commentaries from Breakingviews sets the financial agenda for the next 12 months.

Jan 11, 2012 23:31 UTC

Double-dipping Twinkies tarnish bankruptcy process

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By Agnes T. Crane

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

Wednesday marked a day of mourning for American junk food aficionados – and not for the first time. Hostess Brands, maker of the cream-filled bright yellow Twinkie snack, filed for Chapter 11 bankruptcy just three years after emerging from the court’s protection. That’s not just a kick in the gullet for Ripplewood Holdings, the private equity owner that sank $40 million into the baker last year. The company’s failure leaves a greasy stain on the American bankruptcy process itself.

COMMENT

Chapter 11 is for creditors. It’s intended to be used when continuing the company will return more to existing creditors than an immediate liquidation (think 20 cents on the dollar instead of 5 cents on the dollar). It is not supposed to ensure the long-term viability of a company. It merely gives creditors a chance to come together a say, “after discounting the 20 cents/dollar forecasted return by the risk that the reorganized company will fail again, the expected return is still higher than the liquidation value of the company, so keep the company in business.”

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Jan 10, 2012 22:28 UTC

Private equity skewered by Romney-bound arrows

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By Jeffrey Goldfarb

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Private equity is caught in the crossfire. Rivals for the Republican nomination for the U.S. presidency are leading a full-blown assault on front-runner Mitt Romney’s track record at Bain Capital. The attacks won’t stop Romney, but the collateral damage could hurt the buyout industry.

Dec 23, 2011 16:51 UTC

LBO debt gluttons have now gorged on equity too

By Jeffrey Goldfarb

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Leveraged buyout kings renowned for their debt gluttony have now gorged on equity, too. They’re sitting on nearly $400 billion of cash committed by investors, according to Preqin, or more than $1 trillion of purchasing power. A big slug of it belongs to mega-buyout funds that are already at or approaching their use-by date.

Dec 2, 2011 15:48 UTC

Loan hangover will cast pall over European buyouts

By Quentin Webb
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Once again, banks in Europe have been left standing when the music stopped. In an echo of 2008, lenders backing private equity deals have found themselves with a big backlog of unsold loans. That bodes ill for future buyouts.

Nov 1, 2011 14:28 UTC
Edward Hadas

Capitalism takes three big hits in one day

By Edward Hadas
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

It may just be an unhappy coincidence. Still, there was a common theme to three pieces of bad news from different parts of the financial world on Tuesday. Monuments of financial folly are falling apart and the debris is hazardous.

COMMENT

World finance run amuck. Too many big shot geniuses using complex mathematical strategies to get rich quick with little in the way of international regulation.

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Oct 24, 2011 19:52 UTC

Apax misses with HIT disposal

By Quentin Webb
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Mattel’s $680 million purchase of HIT Entertainment, the company behind kids’ characters Bob the Builder and Thomas the Tank Engine, brings a sorry tale of private equity ownership to a close. But uniting Bob with Barbie does not necessarily mean they’ll live happily ever after.