When was the last time you filled out your 1040 and wrote in $3,700,000,000 as your gross (pun intended) annual salary? John Paulson did for tax year 2007. And how did he reap such a bounty? Did he invent a cure for cancer? Compute the elusive formula for achieving Peace In Our Time? Help the human race in any way, shape, or form? Not quite. He 'earned' it by managing an investment hedge fund, betting against homeowners while hoping and praying to the Almighty Dollar Devil that those homeowners would default on their subprime mortgages!
Paulson ranked number 1 in this salary category, best described as obscene, that would have made the robber barons of Teddy Roosevelt's day cringe and join the Socialist Party in protest. Paulson did NOTHING to benefit the people of our great land. He is a vulture feeding off the carcass of a badly wounded mortgage industry. Had he been an inventor who rolled out an inexpensive, 150 MPG car that made the USA less dependent on foreign oil while simultaneously saving every family in the country a hefty amount of money and improving air quality, I would congratulate him.
But even then, how much compensation would be appropriate? Astronomical salaries like Paulson's stir up bitterness (like mine) and distrust for an economic system that, with tweaks here and there, has served us so well. Have we, as a nation, become so 'me-centered' that we judge people by their paychecks rather than their principles? Correct me if I'm wrong, but I think that our Constitution's preamble begins with the words, "We the People", not "Me first, the rest can go to Hell". Why do people like Paulson funnel their considerable intellects and energies toward self-aggrandizement rather than selflessness? Is it a character flaw? Insecurity? Hatred or jealousy... or never having developed past the anal-retentive stage?
Had Paulson been around back in 1776, he probably would have been a Boston bookie laying odds against the revolution. Then, when his bets lost, he would have high-tailed it back to not-so-Great Britain to kiss up to King George III by preaching the virtues of monarchy over democracy.
Friday, April 25, 2008
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For the sake of argument, I don't see much wrong with this kind of investing. It is passive speculation. The man did nothing to [i]cause[/i] the mortgage bubble to burst. He did nothing to force people into loans they could not pay. He did nothing to [i]make[/i] housing values decrease. All he did was speculate on what direction he thought the market was likely to move.
Likewise, I'm I a [i]vulture[/i] because I've got a significant amount of money invested in oil companies and make money when oil prices increase? I'm not making oil rise, I've only identified a movement on the market and am investing wisely to profit from it.
It's just another case of demonizing the rich, and laying blame on the benefactors as if they caused the woes of foolish investors.
Bottom line... bad loans are the fault of the people foolish enough to enter into them. I know everyone was told at some point in their lives to read a contract before signing one, and to live within one's means.
Any investor with a brain is going to look at market movements and invest based on where money is most likely to be made. Do you put [i]your[/i] money where it will [i]lose[/i] value? Of course you don't.
Anyway... that's the opposing view.
EDIT: Sorry for the broken italics codes. I used the BBCode[i][/i] instead of HTML < i>< /i>
Not to mention that Hedge Funds increase potential profitability by significantly increasing RISK. Hedge Fund investors lose money as often (or more often) as they make money. That's why the minimum investment in Hedges is usually around 250k and up, because people of that amount of wealth can afford to lose it all (which they often do)
It's only when they make money that people get pissed off. All the other times, when they lose their asses, ...everyone looks the other way.
But at least we got a great article to argue about. Can't wait for next week's "Bitter Tirade".
bfoxy - Hedge funds are legal. They are similar to mutual funds, but are not regulated by the SEC and, on average, require a $1 million investment. Not for the faint of heart. Hedge funds try to 'hedge' against downturns in the stock market by betting against the current market trends. For example, when mortgage company stocks were booming, a hedge fund, like the one in this article, might see a potential disaster looming, and either 'short' the stocks that were booming, or invest in those stocks that would profit from that disaster.
Do you really think that Paulson paid 40% to Uncle Sam? If so, you live in a dreamland. There are plenty of tax dodges, some legal and some borderline, that allow the super-rich to avoid paying their fair share. And it is the middle class, and those wealthy folks who are honest, who bear the brunt of this injustice.
Nowhere in my post did I suggest that he caused the mortgage crisis. Nowhere did I tell him, or anyone else how to earn or spend their money.
The astute reader would have noted that I defended capitalism but bemoaned the direction this country is taking, especially when impressionable minds are deluged with stories about billion-dollar paychecks for those who profit from other people's pain.
Well, as far as your assumption that the wealthy don't pay their fair share of the tax burden, you couldn't be more wrong.
The top 3% of American wage earners pay 70% of the total tax burden. In fact, the top 50% of American wage earners pay 96% of the total tax burden.
Is that not enough?
Also, your choice of wording suggests something that didn't happen. He didn't profit FROM other peoples pain, he simply profited while other people were experiencing pain.
That happens with ALL investments. As one side makes money, the other side of the same investment loses money.
For example: As Airline stocks plummet, Train stocks increase. As Oil futures rise, stocks in automobile companies who build SUVs plummet.
So if I invested heavily in Hybrid vehicle technology, Am I profiting off the "pain" of the failing airlines?
Is investing in solarcell companies, profiting off the "pain" of rising energy costs?
Let's say that you hold Mcdonalds stock... then Burger-King has a rash of food poisoning incidents in which people DIE. McDonalds suddenly experiences a big stock jump as consumers rush away from Burger-King and to McDonalds.
My god, man! You just profited off the deaths of innocent people!!! You should be ashamed of yourself!
Simply investing on the "winning" side of the equation does not make you evil or unethical or immoral. It makes you a good investor.
You left out a very important part of the equation when you stated that the top 50% of (USA) wage earners paid 96% of the total tax burden. You failed to mention that the top 50% of USA wage earners made 95% of total taxable income. Is it not then appropriate that they pay ~96% of the taxes?
The flip side of the above statistics is that 50% of USA wage earners made a total of 5% of total taxable income. That wage gap is not healthy for our country.
I agree completely.
So people should look to earn more, and stop asking for handouts. Self-reliant and responsible citizens with a "can-do" attitude is what is good for this nation.
Taking out loans that they can't pay ends up costing us ALL in the end.
Don't give a man a fish...
Don't teach a man to fish...
...show him the river and say, "I believe in you."
Or they could have me and the millions like me pay more than a paltry 7%.
Do you have any idea how many billions (perhaps trillions) of dollar in revenue it would generate to hit earners in my income level with a tiny 5% rate increase?
But let's not raise Ken's pathetic tax burden from 7% to 12%...
No... let's raise the 35% crowd to 48%!
Go America! Punish the successful...
***Hey, only a few more days and I can argue about the next article on Biter Analysis! Yeah!
I said nothing about eliminating education.
I'm saying that it is about time that liberals see a man as his equal... to look at a man and see someone who is just as capable as they are.
Why the attitude: "He can never make it without my help."
You would never accept that for yourself...
Therefore, show him the river and have faith and confidence that, being just as capable as you, he too, will succeed.
Again, unless of course you don't think he can. YOU can... but not him, right?
Ken - I agree that self-reliant and responsible citizens with can-do attitudes are good for our country. I don't, however, understand the 'Don't teach a man to fish' twisting of the biblical parable. I hope you're not suggesting that mandatory education in the school system be made voluntary. If that was not your intent, then government, by making education mandatory up to a certain age, is 'teaching a man to fish', is it not? And isn't an educated populace good for the country?
A higher tax rate for "the 35% crowd" would most certainly NOT be a major disincentive to those who aspire to earn the higher income that would place them in that category. Let's look at income tax history. From 1951-1964, the top tax rate for married couples earning over $200,000 was 91%. From 1965-1981, the top rate was 70%. Did the folks in that category go bust? Did no one aspire to be successful ever again? No. People continued to strive to earn more, even with the threat of higher tax rates hanging over their heads.
Bfoxy - I'm with you 100% that tax loopholes should be closed. Once that is done, and the ensuing revenue stream is analyzed, perhaps income tax rates can be lowered for all citizens.
First, I've never said that there is no incentive to earn. I said that higher earners are punished for their success. Almost anyone would love to be in the position to "Be punished". But it still doesn't make it right.
You acknowledge that 95% of the taxes are paid by the people who make 95% of the money. That's fair, right? Yet you want it higher... how much higher would satisfy you?
One of the biggest tax loopholes is that if you are married with two children and earning under $25k... you pay NO taxes.
Yes, let's close ALL loopholes and ensure that ALL Americans contribute at least a little.
How did this get away form the original topic that "Paulson behaved unethically" in his investments? That's what I completely disagree with.
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