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Nofsdad


Joined: 06 Jul 2003
Posts: 8380
Location: Central CA
Posted: Tue Oct 23, 2007 3:09 pm    Post subject: Oozing Through The Loopholes-Dull Rant Alert  
Back when Eddie was riding the crest of his "guruhood" we had been discussing the obscene amounts of money paid to CEOs and other honchos and I had been doing my usual bitching and complaining when I was informed that Eddie Lampert takes no salary for acting as SHC's chairman.

I have no idea what that particular non sequitur was supposed to prove in terms of Eddie's greed or lack thereof but we countered with the fact that he had just taken home over a billion bucks in compensation the prior year and it didn't matter what you called it, salary, fees, or a forgive me gift from his flatulent granny for spoiling his dinner party, it was still a billion bucks. I've been looking for, if not confirmation, at least support for that contention ever since. Finally found someone who agrees.
First, from the pointing blog entry:
GREED
Quote:
(article from 2006) Alpha says that one year ago Edward Lampert of ESL Investments made headlines when he became the first manager in the survey to earn $1 billion in a year.

Quote:
What's interesting from a moral point of view is how these gigantic incomes, called "carried interest," are treated by the IRS:

Which makes for a pointed debate one side of which can be found in, of all things, a newsletter devoted to hedge and private equity funds:
Semantics Aside, Carried Interest Is Salary
Remember, this article isn't being written by "socialists" or "lefties" or "anti-capitalists". It appears in and was written for a publication by and for capitalists and investors in hedge funds and private equity funds.
Quote:
The growing debate about “carried interest”—the profit share of hedge, private equity and venture capital fund managers, i.e., their performance or incentive fees—both in the United States and in Europe, has predictably degenerated into something closely resembling class warfare. The left screams at a perceived inequity in the tax system that gives (a very small number of) rich people a big break, while the right argues that any change at all in that system of tax breaks will stifle investment, entrepreneurship and creativity and eventually lead to socialism.

My questions here would be what is the present situation leading to and what difference does it make to the "huddled masses" which are the ones being exploited in ANY system in force today but then what the hell do I know?
Quote:
Alas, in this case, the huddled masses have a point. “Carried interest”—which currently is taxed at the 15% capital gains rate, rather than the higher earned income rate—is not “sweat equity.” It is unambiguously salary: money paid to a fund manager for doing his or her job, that is, taking an investor’s money and making it grow as much and as fast as he can. To argue otherwise is merely a battle over semantics.

Quote:
The fact of the matter is, both management fee and performance or incentive fee income is earned income, earned in the performance of a set task undertaken on behalf of clients with an understanding as to how the fund manager will be compensated, both if he does a good job or not. It is no different than the money made by mutual fund managers—generally exclusively in the form of management fees. Capital gains are investment income, a profit from the sale of some asset or another. In spite of the vociferous protestations to the contrary, they are not one and the same.

So Hedgies can get paid based on performance but taxed based on investment income because they're investing (other people's) money? Kind of nice to have your cake and eat it too, eh?
Quote:
It is the investor who is taking the risk, and we reward that investor with a capital gains tax rate. The fund manager’s risk is the same risk run by anyone managing a business, and fund managers deserve no special treatment over businessmen and women who have chosen other fields.

But now we know why so many of them are crawling out of the woodwork and taking over everything in sight, don't we?

For those that still think hedgies are some kind of "heroes" and who will point this out if I don't: Wink
Quote:
To be sure, insofar as fund managers are also investors in their funds—and many, if not most, are—the return they earn for themselves on their own investment is indeed “carried interest” and ought to be taxed as such. But that 20% of the profits earned by investing other peoples’ money? That’s earned income, and it should be treated in the same way that any other earned income.

Quote:
The bill currently making its way through the U.S. House of Representatives, which would change the partnership laws regarding “carried interest,” is problematic. Any bill that seeks to remedy the patent unfairness of fund managers paying less than half of what they should on most of their income should take into account actual sweat equity: Carried interest, properly applied, is a good thing, and a boon to the economy. But the flaws of one bill do not make right this wrong: Performance fee income is earned income, not carried interest. The battle is not about semantics, but simple fairness.

And hedgies such as Eddie Lampert are NOT a heroes because they make a billion bucks. Just sleazy operators, some of which are perhaps more talented at getting their hands on other people's money than some, perhaps a tad more innovative in finding ways to screw the system and the economy for their own gain, but they're certainly not heroes outside their little circle of one percenters.
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dictators_rule


Joined: 08 Jul 2003
Posts: 6309
Posted: Tue Oct 23, 2007 5:56 pm    Post subject: bank interest  
Ok,with that logic that means that the ordinary interest from the bank should be taxable at 15% since banks invest heavily and derive alot of income from 'investments'.

The only way I would have any empathy,not sympathy for the hedgies is that if they truely do only take STOCK-not interest,not a fee but if you get paid only in stock and YOU cash it out then YOU could claim the capital gains rate of 15%.Stop hiding behind YOUR articfically created entities on YOUR income tax.
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Nofsdad


Joined: 06 Jul 2003
Posts: 8380
Location: Central CA
Posted: Tue Oct 23, 2007 7:10 pm    Post subject:  
Yup. They get to enjoy the best of both worlds now. Get paid as income but pay taxes as if it were capital gains. No other job in the world allows you to do that, why should that one?
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dictators_rule


Joined: 08 Jul 2003
Posts: 6309
Posted: Tue Oct 23, 2007 7:17 pm    Post subject: exec already get taxes  
And if you look at executive compensation for many companies including Sears many execs already have their taxes paid on stock awards.Fine if YOU want to include that in YOUR contract and board approves it and spells it out in the proxies.
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SearsService


Joined: 17 Nov 2003
Posts: 1081
Posted: Tue Oct 23, 2007 7:41 pm    Post subject:  
When I look up the definition of "Robber Baron" in Wikipedia, I expected to see a picture of Lampert, along with the description. Doh!
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Nofsdad


Joined: 06 Jul 2003
Posts: 8380
Location: Central CA
Posted: Tue Oct 23, 2007 9:48 pm    Post subject:  
Lampert's still a wannabe. Those old oil and railroad typhoons REALLY knew how to put the screws to the "unwashed masses". Eddie's still in the baby steps stage. Wink
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700-7guy


Joined: 08 Mar 2005
Posts: 54
Location: somewhere in the southwest
Posted: Wed Oct 24, 2007 8:11 am    Post subject:  
Quote:
Lampert's still a wannabe. Those old oil and railroad typhoons REALLY knew how to put the screws to the "unwashed masses


There is a difference though. The old Robber Barons got rich, and often shafted their employees, but they also built industries that made this country an economic juggernaut. Steel, railroads, petroleum... all of these helped set the USA up for the 20th century.

What has Eddie Lamprey built, other than a personal fortune for him and his henchmen? All he has done is shift money around on paper, and destroyed an American institution in the process.

As far as I am concerned, he can rot on the 6th layer of Hell.
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