The news this week included a report from Institutional Investor which tells us that the top 25 Hedge Fund Managers took home a combined $21.2 Billion in 2013, a significant increase over 2012, when earnings totaled just $14.1 Billion, the lowest sum since the 2008 financial crisis.

If I did the math correctly, the average wage of these 25 individuals computes to $407,692.31 per hour, somewhat above our current $7.25 per hour minimum wage.

What is it that Hedge Fund Managers do that makes them the highest paid people in the world?

Do Hedge Fund Managers create economic value?  Do they create jobs?  Do they make products or deliver services which make our world a better place?

Unfortunately, they seem to do none of the above.

Hedge Fund Managers look for opportunities to exploit temporary weaknesses, gaps, flaws or aberrations in the operations of a specific company or in an economic sector overall.

They typically have billions of dollars of resources at their disposal, and by creating and taking well-crafted and strategic financial positions, they have the ability to move markets, generally to their own benefit.

The film “Other People’s Money”, starring Danny DeVito and Gregory Peck, was released in 1991.  Danny DeVito plays the role of “Larry the Liquidator” providing us a crude but quite accurate roadmap of what Hedge Fund Managers do every day.

In the 19th century, we called this sort of activity “Piracy” and we labeled the perpetrators “Pirates”.

In the 20th century, we called this sort of activity “Organized Crime” and we labeled the perpetrators “Mafia” or “Gangsters”.

Here we are in 2014, clearly well into the 21st century.

Our Hedge Fund Managers are out in the open, creating outcomes which seem to have no potential for positive impact on the U.S. or world economy, and we are giving them not just permission to operate (no regulatory oversight), but also preferential tax treatment on their booty (known as ‘carried interest’).

Hedge Fund Managers typically receive their compensation in 2 ways – an overall management fee equal to 2% of assets under management, and a 20% share of any profits on the assets under management.

It is the tax treatment of that 20% fee — categorized as Carried Interest — which is currently taxed at 20% — versus the 39.6 percent rate which business owners must pay on their earned income — that has created somewhat of a firestorm in Washington.

None of this makes any sense to me:  does it make sense to anyone?

Advertisements

What, another Congressional Witch Hunt?

Why not just send the elected officials home from D.C, then drag a huge bag of money out onto the National Mall, and burn it?

That solution would accomplish much more, and cost much less, than this current circus John Boehner wants to convene.

Please: let’s not forget that John Boehner is a Congressman who was elected in 1990 to represent an obscure rural district in SW Ohio, having taken the seat from an incumbent child molester….

There really is something wrong with a governance model that has allowed Boehner to subsequently acquire so much power over the people of the United States — despite the reality that his Congressional District – the 8th District in Ohio – is comprised of just 725,000 people, roughly 0.0023% of the U.S. population.  And, this Congressional District looks nothing like the rest of the U.S.

It is 90% White, very blue collar, predominantly Republican, and quite conservative (not that there is anything wrong with that).

His district is not at all representative of the demographics of our citizenry, yet Mr. Boehner has somehow achieved the status of Chief Rocket Scientist (aka Speaker of the House), so he now has the power to pull the strings which may ultimately destroy our economy and take our country down.

We have a huge weakness in our governance model, and it is certainly not at 1600 Pennsylvania Avenue, as some ultra-conservative characters might like us to believe.