Hedge Fund Managers Make Billions

Hedge find managers seem to have benefit from the strong recovery in the financial sector and the government coming to the aid of large banks on the brink of collapsing. According to industry reports, managers of leading hedge funds raked in billions as fees and capital gains last year.

The top 25 hedge fund managers took home over $25 billion, which means an average manager at a leading fund earned in excess of $1 billion last year. The manager of Appaloosa Management, David Tepper, took home $4 billion. A large part of profits for the fund came from their bet in favor of the government bailing out large banks.

Second on the list was John Paulson who made in excess of $2 billion. Kenneth Griffin, the manager of Citadel Investment Group earned almost $1 billion and came third in the list.

Most of the profits for hedge funds last year resulted from the extreme volatility in the stocks of financial companies. When these companies were close to a collapse, these hedge funds were able to pick up their stocks at extremely low levels. And when the government came forward to help the financial system by using taxpayers’ money, it led to spectacular returns for these funds.

Huge income but lower tax rates

There has been a lot of criticism that hedge fund managers with their salaries in billions are still able to get away with very low tax rates because a part of their earnings are shown as capital gains, which are taxed at just 15%. This is in stark contrast to average American workers, who earn just a tiny fraction of these amounts and still have to end up paying up to 35% as tax.

There have been several attempts at correcting this unjust system, but the strong Wall Street lobby has always succeeded in ensuring that no reform takes place. The resistance to this reform comes from both sides of the political divide as several Democrats and Republicans rely on the financial industry for campaign funding.

With unemployment rate still close to 10%, this news might sound like a cruel joke to many people who have been looking for a job for almost a year now. It is a clear sign of how wealth continues be concentrated in the hands of a few rich people at the expense of the rest of the population.

Comments

  1. http://Anonymous says

    Why not reduce income tax rates to 15% to make everything “fair”? The hedge fund managers are still paying vastly more in dollars than ordinary income earners despite the difference in tax rates.

    And the 35% income tax number quoted is a crock anyway: when you add up the sales tax on everything you buy, excise taxes, charges & levies (look at your phone & utility bills), property tax, school tax, FICA taxes of over 15%, state and city income taxes — it is wonder people have anything left with which to support themselves.

    Rich people don’t pay taxes — but high earners do, and so do low earners. If people realized how much of their working lives are go to pay taxes they would recognize that the system is just a new form of slavery.

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