How hedge-fund-friendly is the White House?

By Felix Salmon
May 11, 2009

Ryan Chittum makes a good point about the hedge funds kvetching about the Obama administration on page C1 of the WSJ: their “pique” (to use the word in the WSJ headline) might well be a function of the fact that their income taxes are about to rise dramatically:

Obama’s plan would force hedge funds and private equity and the like to pay income tax like the rest of us instead of much-lower capital-gains rates they pay now on their earnings. Sure, some hedge funds have honorably acknowledged they ought to pay the same rates as everyone else, but nobody likes to effectively have their tax rate doubled overnight—especially when their earnings are already down.

It’s also worth noting that the piece says that 70% of hedge-fund campaign donations went to Democrats in the last election cycle — and then goes on to quote at length Paul Singer, of Elliott Associates. What it doesn’t mention is that Singer was the single biggest supporter and fundraiser that George W Bush had in New York; that he gave even more money to Rudy Giuliani, partly by lending him his private jet; and that in general he is about as loyal and committed a Republican as they come.

Personally, I think it’s a positively good thing that hedge funds are feeling piqued by the White House. Maybe they were hoping that Larry Summers’s presence (not to mention that of Rahm Emanuel) would make the White House a bit more hedge-fund friendly. On the other hand, maybe this is being a bit more hedge-fund friendly. After all, if the worst that the White House does is make good on its promise to keep the Detroit car industry from imploding completely, you can make a pretty good case that hedge funds have gotten off pretty lightly.


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I really, really hate the idea that we’re slouching toward the Latin American version of democracy, in which winning elections is mostly about expropriating the people who didn’t vote for you. Is “carried interest” a fraud? Absolutely. Should hedge fund managers pay income tax rates on income? Absolutely. This is because they should be accountable to the same laws as the rest of us, not to different ones, and that those laws should be the ones laid out the US Code as interpreted through years of precedence by (hopefully somewhat) impartial courts.

Insofar as they are “piqued” by the loss of special privelege, they can go stuff it. But they shouldn’t be mistreated vis-a-vis the auto industry because the latter has more votes or is otherwise more politically popular.

I agree with WSJ that BHO has transported Thuganomics of Chicago to Washington DC. There are glaring examples of that are not transparent, IE bond holders of GM and Chrysler were given 29 cents on a dollar but UAW got 100 cents on the dollar, Like when California decided to cut wages of its employee BHO it is heard that they would not give 6.5 billion dollars stimulus money till those cuts are restored.

I call this as pay to play and it is not the reason Blagojewich lost his job a governor and my question is what this whole country is going to do about this corruption of Unions, Donors and Government officials including BHO, Congress, Senate on one hand and SEIU, Acorn, UAW and other big donors of Democratic machine. There should be something more that just wait for four years and change the government rather have a grass root revolt ( peaceful ) to change this corrupted way of doing business in the federal as well as government at all levels.
Could citizen file a law suit in the federal court to stop this non sense and wake up those idiots in the Government.

Posted by VJ | Report as abusive

For starters, America is not a democracy. It is a plutocracy and quite possibly, an oligarchy. The US long ago sold its soul to the devil, in spite of all that talk of God and apple pie. America has no values other than that of the Almighty dollar, which may in time become worthless, just as all the rhetoric and deceptions that define and constitute the USA. God bless America. Let’s all go shopping.

Posted by Anonymous | Report as abusive

“. . . you can make a pretty good case that hedge funds have gotten off pretty lightly.”

Gotten off pretty lightly for what?

Posted by James | Report as abusive

Ah, so what now? Pigovian taxes for anyone who achieves financial success in America and subsidies for those who do not? That is the epitome of Un-American behavior, IMHO!

I’m glad too see that oil speculators are once again pushing up the price of oil thus hurting the american consumer. I’ve got news for them the economy won’t rebound because when the price of my gas goes up 30 cents in two-weeks I start looking to cut expenses. I feel that if the Obama Administration and the current Congress don’t act quickly to curb the gas prices which hurt all americans they could find themselves eventually replaced with a government that does. People, like my self are slowly tiring of a government that raises our taxes, increases the deficit and does nothing to protect it’s people from those who seek to defy the fundamentals of sound economics in favor of profit. When, we reach the point that we’ve had enough then like those who threw off the British King almost three centuries ago; we too will throw off this current government and form a new government that will provide adequate safe guards to secure our liberties and ensure our posterity.

Posted by Mark Carl | Report as abusive