Stock Research – As Hedge Fund Industry & Private Equity
gets Hotter – Heat is Building on them TOO!!!
Submitted by richardstoyeck
Both the hedge fund and private equity industry had free rides during
George Bush’s Administration when the Congress was safely in
Republican hands. All that changed in November 06 when the Democrats
swept the Congress, and with the change in control came new Democratic
responsibilities to address the fiscal deficits generated during the
time, the Republicans controlled both the executive and legislative
branches of government.
It is strange to ponder, but the Republican Party which is considered
by most to be the party of fiscal responsibility has probably generated
80% to 90% of the nation’s accumulated national debt. Nevertheless,
myths still persist that the Democrats are the big spenders. Just
today, the major newspapers featured articles stating that Bush says
Democrats must control spending.
Now there are only two ways to deal with spending. The first is to
spend less, but no politician likes that concept. The first rule of
government is that politicians regardless of party SPEND MONEY. The
second way is to raise taxes in an attempt to close the gap between
spending and revenues taken in. With the Democrats in power, they
will use the second method, which now brings us to Hedge Funds and
Private Equity.
Under the provisions of the current tax code, both Hedge Funds and
Private Equity are given preferential tax treatment. Certain items
of income which might be considered subject to ordinary income tax
rates are instead subject to 15% capital gains tax rates. As for the
equity of this policy, the quick and dirty of it, is that there is
no equity or fairness. The tax code is 80,000 pages of special interests.
Every provision in the tax code was written in a certain way to benefit
some one, or some special interest, whether it’s the farmer or
a hedge fund, or the restaurant industry. Everybody exercised their
political muscle at one time or another to get what they could out
of the tax code.
These special interests just head down to Washington DC and meet
with the people who control the Congress, go to fancy restaurants,
and try to re-work the tax code to benefit themselves. The latest
journeyman to Washington is none other than Henry Kravis, the man
who made the private equity industry what it is today, through the
formation of Kohlberg, Kravis, Roberts and Company (KKR). Democratic
Congressman Sander M. Levin is proposing to more than double the amount
of taxes Kravis now pays. Kravis is a billionaire several times over,
and he’s still looking to cut his tax bill. Whatever happened
to giving back. Whatever happened to Andrew Carnegie’s approach
to civic responsibility?
The Congressman’s staff asked Henry Kravis very pointedly, if
increasing taxes on private equity would adversely affect workers
and other middle income type families by distinctly lowering returns
that pension funds got on their investments. When Kravis answered
“No”, the meeting ended abruptly.
In other meetings, Stephen Schwartzman who founded the Blackstone
Group, and David Rubenstein, who co-founded the Carlyle Group have
met with other regulators in an attempt to stall the tide. Lobbying
groups are being set up in a hurry, and money is being poured into
them by private equity and hedge funds, who up until recently were
asleep at the switch. They did not realize to what extent Washington
has had them in their gun sights. For more on this topic, please visit
our website.
About the Author
Richard Stoyeck’s background includes being a limited partner
at Bear Stearns, Senior VP at Lehman Brothers, Kuhn Loeb, Arthur Andersen,
and KPMG. Educated at NYU, and Harvard University, today he runs Rockefeller
Capital Partners and StocksAtBottom.com
http://www.stocksatbottom.com/hedge_fund_industry_private_equity.htm
