Carried Interest

Obama The Liar-in-ChiefObama and his coterie in the White House have finally submitted their initial draft of the American Jobs Act, though it doesn’t yet appear to have been formally introduced to Congress.

By any measure this is a late effort but, as usual for the Obama Regime, it’s not a better late than never situation – except possibly in the context of Obama keeping and his handlers keeping his own job for a few more years.

It’s largely (70% of it)  the buying of votes and retreaded Liberal wealth redistribution ideas.

Simply put, it’s $447 billion of up front spending allocations to be supposedly paid for over the course of a decade by tax increases, including taxing the carried interest, or profits-based compensation, of private equity managers, real estate investors, and venture capitalists as ordinary income, instead of more lightly taxed capital gains.

This is not going to spur business or employment. It will likely have quite the opposite effect due to what Carried Interest is and how it works.

Carried Interest:

A share of any profits that the general partners of private equity and hedge funds receive as compensation, despite not contributing any initial funds. This method of compensation seeks to motivate the general partner (fund manager) to work toward improving the fund’s performance.

Traditionally, the amount of carried interest comes out to around 20-25% of the fund’s annual profit. While all funds tend to have a small management fee, the management fee is meant to only cover the costs of managing the fund, with the exception of compensating the fund manager.

Carried interest is meant to serve as the primary source of income for the general partner. However, the general partner must ensure that all the initial capital that the limited partners contribute is returned along with some previously agreed upon rate of return.

What happens is that people running the fund, called the General Partners charge the rest of the funds’ investors, the Limited Partners a combination of maintenance fees and profit sharing. This is usually referred to as “2/20,” signifying fees of 2% of the funds’ assets and 20% of the funds’ returns above an agreed upon amount known as the “hurdle rate.” That 20% is what is the Carried Interest, meaning the General Partners’ carried or ongoing financial involvement in the fund.

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When I’m Rich Enough

By many people’s standards I’m quite wealthy, one of the Rich that they want to enslave for the subsistence of the less- and non-productive. I’m not, however truly one of the “Rich People” despite my income and the material comforts it brings. I can’t buy and/or do anything that pleases me.

If and when I’m rich enough to do utterly as I please, insofar as housing and spending is concerned, I’m going to do this:

Stair Slide
Someday, If I Can Swing It, I’m Going To Have One Of These

Yes, as foolish and seemingly wasteful as it seems, I want to install a slide that in my home – if I don’t chuck it all in and move my family into a ger somewhere – yes, my wives would cheerfully agree to that.

Ger is the Mongolian term for their felt tents. If in their presence, call then yurts at your own peril. Their past “dealings” with the Ottomans and Russians have left them sensitive to that word.

That’s the true boon of significant material wealth. It’s not just that you can afford such foolish luxuries; it’s that few will look at you too askance for indulging in them.

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Equality Of Result

The Liberals’ idea of race relations and mitigating the racism that they see everywhere – except in the mirror or in the eyes of non-Whites – has always centered on accommodation, appeasement, excuses, and lowering standards in order to foster an equality of result. This has, in general, had poor results but was especially harmful to everyone when they applied it to creditworthiness.

Thomas Sowell sums up how well this helped the Blacks:

Government agencies, from the Department of Housing and Urban Development to the Federal Reserve leaned on lenders to lower lending standards, and the Department of Justice threatened prosecutions for discrimination if the racial makeup of people approved for mortgage loans did not match their preconceptions.

It worked. In fact, it worked so well that many blacks got loans that they could not have gotten otherwise.

Now the statistics tell us, belatedly, that blacks lost out, big time, from this “favor” done for them by politicians.

Reality being what it is, these Blacks who were handed loans that they didn’t except by grace of their skin color and Liberal stupidity qualify for, were “overrepresented” among those who later defaulted on their mortgages.

Of course a certain equality of outcome or result was achieved by the Liberals’ policies. The banks’ move to shield themselves from the inherent risks in sub-prime mortgages by bundling them into securities and the federal governments’ regulations that coerced financial firms to heavily buy those securities was a large part of what led to America’s current economic woes which have affected us all.

It’s a simple fact that lowering the standards and applying coercive force to ensure any form of demographic quotas can and will only achieve an equality of results when those results are negative and such negative results are the most likely outcome.

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Americans’ Greatest Fear

Americans’ greatest fear is not Muslim Terrorism. The Muslim terrorists, even when – it’s not an “if” – either Pakistan, North Korea, or Iran arms them with nuclear weapons, cannot do as much lasting harm to America as our government’s failed and/or misguided policies can do.

Generational Unemployment
We’re Just Lucky Your Grandparents Couldn’t Sell Their House
And Buy That Condo To Florida

No; American’s greatest fear is that we and our progeny, and perhaps their progeny as well, will be saddled with a collapsed and overburdened economy that results in generational unemployment.

And really, how bad could it possibly be? The urban Black population has had several generations in which a large number of their families had no family members who had ever been consistently employed and look how well they’re doing…Oh wait!

On the bright side, once well-established families families having to move back in with their parents will bolster the employment of divorce lawyers once the In-Law Factor takes hold. 😉

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