Studies of Bloated CEO Pay Miss the Fattest Cats in America

Each year The New York Times creates a furor by publishing a list of the highest paid CEOs. (This year the top 10 averaged $30.3 million in total compensation.) And each year “the paper of record” misses the real story: Yes, CEOs of public firms certainly are paid ridiculous sums, even compared to corporate chiefs in other rich countries. But the true robber barons run hedge funds and private equity companies. They make billions, not millions, and they do it not by running businesses, but by siphoning wealth away from companies, consumers, students and governments.

Just take a look at what the top 10 hedge fund managers “earned” in 2013…



That means these top hedge fund moguls earned nearly 59 times more than the top CEOs. Here’s America’s new math for a new Gilded Age:
◾In 2013, George Soros made $1,923,077 per hour!
◾In one HOUR Soros makes as much money as the median American family earns in 37.7 years. (Yep, one hour of his time is “worth” 37.7 years of your family’s.)
◾The top 10 hedge fund managers earned as much in one year as 334,902 elementary school teachers or 271,575 registered nurses.
◾Hedge fund managers pay a lower tax rate than teachers or registered nurses because of a special tax loophole called “carried interest.”

Financial Strip Mining

Hedge funds and their close cousins — private equity firms and the proprietary trading desks at large banks — are financial strip miners. Rather than create new products and services, they tear wealth away from the real economy, and from us.

Let’s start with high-frequency trading (see my summary). By trading in microseconds, the strip miners are able to reap enormous profits by skimming money away from slower-moving traders like mutual funds and pension funds. In the time it takes to press the button on E*TRADE, a high-speed trader can get between the buyer and seller and extract a few pennies. Do this millions of times per day and you can make a good living. For example, Ken Griffin and his Citadel hedge fund returned over 300 percent in 2007 through high-frequency trading.

Another tactic is to create financial products that are designed to fail so you can collect the insurance on them. John Paulson, number four on the hedge fund list, did just that during the height of the housing bubble, in collusion with Goldman Sachs. Through the infamous Abacus deal, Paulson made a billion dollars by rigging the game and was allowed to keep it all. Goldman Sachs was fined $550 million for not telling investors what Paulson was up to.

One of the biggest strip mining efforts takes place when private equity funds and hedge funds buy up companies using borrowed money, which they then put on the books of the target company. They then use the target company’s cash flow to pay off the debt and pay themselves enormous fees and special dividends. Their profits are sheltered by a special “carried interest” tax loophole, which allows the financial honchos to pay 19 points below the standard income tax rate for high earners. The odds are high that the top hedge fund earners listed above pay a lower tax rate than you do, given the loopholes open to them. (Think Mitt Romney and Bain Capital.)

To pay for the enormous incomes earned through these leveraged buyouts, the strip miners’ companies raid pension funds, cut wages and benefits, sell product lines, reduce R & D and ship jobs abroad. The CEOs of the target companies become junior partners in the rape of their own companies through golden parachutes and enormous stock options.

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http://billmoyers.com/2014/04/21/studies-of-bloated-ceo-pay-miss-the-fattest-cats-in-america/