Just in time for tax season comes the report in yesterday’s New York Times that the top 25 hedge fund investors earned a collective $25.3 billion (with a B) in 2009. This includes seven who earned more than $1 billion, one of whom, David Tepper of Pittsburgh (pictured), earned a record $4 billion. “We bet on the country’s revival,” Tepper told the Times, “Those who keep their heads while others are panicking usually do well.”A perfect blend of patriotic and self-satisfied.
Let’s see if I’ve got this sequence straight: Government deregulates the financial industry, allowing banks to take on more and more debt until the the pile collapses of its own weight. Hedge fund operators, notably John Paulson, fourth on the list, earner of $2.3 billion (up from $2 billion the year before), who made a lot of money shorting the stock of the weak banks, but exacerbating the liquidity problems of the entire system. Then with the entire system verging on collapse, the government comes in, and using public money through the Troubled Assets Relief Program (TARP) and especially PPIP, the Public Private Investment Program in which the government set up risk-free opportunities for investors, and rescues the banks and saves the economy. In other words, the government used its money to rescue the system, to the enormous profit of a small group of hedge fund managers.
It’s a funny old world: government laxity allows one group of pirates to make fabulous fortunes slicing and dicing debt in an outrageous form of financial alchemy, and when that group of pirates gets too greedy for its own good, the government steps in a saves the big casino for another group of pirates, hedge fund operators who make their money, not by investing, not by building, not by sustaining the economy, but by gambling on short term market movements and playing bookie for the highest of high rollers.
So here’s a question for President Obama and our representatives in Congress: why does a man who makes $4 billion get taxed at 35%, the same rate as that same person who makes $373,650? There was a time when the highest tax rate was set at 90%. On the face of it, 90% sounds outrageous, but it applied to a mere handful of people, Rockefellers and so on, who earned massive amounts of money. Why can’t the government, which helped create the mess and which then created the conditions for this fantastical profits, claw the money back, and set a 90% tax on everything earned above, say $250 million?
A little more than a year ago, the country got up in arms because some executives at AIG were paid bonuses that they legally and properly owned. They had the bad luck to get caught up in a rising tide of emotion. Where is the outrage over these windfall billionaires? There was a time, centuries ago, when governments sent troops against the scavengers who made off with the goods that came ashore when ships ran aground in storms. This time, the government helped create the storm, and has helped deliver the goods to the scavengers. Where is the outrage?