Here’s How to Make a Million Dollars an Hour…

welcome back today is tax day and while the rest of us scrambled to meet the midnight deadline for tax returns the richest 1% of Americans will sit tight and comfortable knowing that they’ve gained the system once again combination of subsidies and preferential privileges has transformed the IRS into one of the federal government’s largest welfare programs at least for the super-rich just two years ago exxon mobil the most profitable corporation in human history raked in seven billion dollars from tax breaks alone at same year General Electric paid zero dollars in corporate taxes that’s right zero zilch the official corporate tax rate in the United States may be 35% but loopholes and subsidies supported and lobbied for by major corporations and very very wealthy individuals have whittled the effective corporate tax rate down to about 12% tax deductions for vacation homes and yachts meanwhile some tens of billions of dollars annually back into the pockets of the wealthy while oil tycoons and jet owners get their fair share of government handouts perhaps the biggest beneficiaries of our regressively redistributionist tax system are hedge funds and their managers low taxes on capital gains and the carried interest loophole allow wealthy financier like Mitt Romney to pay lower tax rates than regular working Americans just because they make their money from investments an absurd idea when you consider the tens of millions of dollars rounding other hedge fund managers reap in every year our current tax code is the modern-day version of the feudal laws of medieval Europe its myriad loopholes and deductions create a system of privileges that help the rich stay rich while sucking billions and billions from the Treasury and the working-class every year according to the Public Interest Research Group tax breaks for the wealthy cost the average US taxpayer about a thousand dollars every April no small sum for the millions of Americans struggling to make ends meet in the worst economic downturn since the Great Depression of course manipulating the IRS isn’t the only way the financial elite stays on top I’m joined now by Lesley appalled journalist and author of the new book how to make a million dollars an hour why hedge funds get away with siphoning off America’s wealth less welcome thank you so much for having me what a contribution so let’s start at the beginning now to make a million how do you make a million dollars an hour well I think the answer is real simple uh you have to cheat I mean some of the cheating is legal some of it’s barely legal and a bunch of it is flat-out illegal we don’t make that kind of money in a hedge fund which is an investment fund for the super-rich unless you know the outcome of the race before you run the race nobody puts this kind of money on the line unless they’re pretty sure they’re going to win their bets so when I got involved in doing this research about hedge funds because I noticed that their incomes were absolutely outrageous I found out that the top hedge fund guy made as much in one hour as the average family made in 47 years whoa think about that one hour equals 47 years how did they do that what value do they create for the economy by doing that it turns out the answer is almost no value it’s what economists call an economic rent the rest of it call us call it a ripoff yeah and it’s just foot it it blew my mind entirely when I started to see what they did I remember when hedge funds became he started reading about them and in The New York Times The Wall Street Journal and whatnot it was maybe 15 years ago 20 years ago and there’s kind of this new thing maybe even a little before that and you really had to be a millionaire to even put money in fact they had limits I think you had to have a net worth of over a million dollars and you had two quarter million up because there was so much risk associated with and they were to hedge against problems in the marketplace and you might lose me no there was this whole sense of this is just a protective vehicle it’s like a it’s like a you know the rubber bump bumper to you know or well I’m missing a metaphor here but how did they go well first of all were they ever that and if so how did they go from being basic like protective devices or safety valves for investors to being money machines well they may have been about hedging back in the 60s way at the beginning but by the time period you’re talking about is when we deregulated finance and when we deregulated finance the money that flowed up to the top 1% was enormous it stopped going and working people went to the 1% so there was a huge amount of money to play with and these guys came came around and said hey give me your money I will play with it and you’re going to make a fortune and they came up with a lot of ways to make a fortune that involved insider trading now high-frequency trading which is you know strikes me as something that should be illegal but it’s barely legal in my opinion but they came up with ways to bet and win the bet let me give you one example that blew my mind by the way the proprietary trading disk inside of the big banks their hedge funds – hmm and they invest in hedge funds so there’s there’s a kind of symbiosis between the hedge funds and the large banks here’s an example you might have heard of the famous abacus trade it was about designing a housing security it was designed by a hedge fund so that it would fail so that hedge fund could collect an insurance policy on that’s the sort of good bet on its failure and made more on the bet than they made on the Fairlight but they designed it as well it’s like you could go out and sell a house that’s going to burn down in six months and you’re holding the insurance policy you the sellers holding and you make sure that the insurance policy is worth more than the house absolutely and I one hedge fund guy made 1 billion dollars will leave with a B and Goldman Sachs got caught because they didn’t tell the investors that by the way the guy designed it to fail Goldman Sachs had to pay a five hundred and fifty million dollar fine guess how much the hedge fund guy had to pay huh guess zero zero yeah because he was he didn’t have to disclose so he was in cahoots with it with the big bank uh and Goldman Sachs paid five hundred million dollars he said I fifty but but over a billion dollars was made on this deal by the hedge fund so this is just like a cost of doing business they they don’t you don’t make this kind of money unless you are very very sure you’re going to win the bet take high-frequency trading it’s done in nanoseconds by the time you press the button on your etrade account there is a hedge fund that bought the share and sold it back to you and made a few pennies profit because they can see you coming they’re working in a different time universe they’re working in nanoseconds you’re working in suck seconds minutes there’s a guy who’s doing this who bragged to the press that over the last five years he had had a losing day in five years and the longest he ever held a stock was for the longest two seconds so there’s half or more of all the trades in the stock market are these high-frequency traders holding it for less than two seconds we used to make things in this country Adam Smith Wealth of Nations 1776 his whole point was that the wealth of a nation is what it makes the example that he used was a tree limb on the ground has no intrinsic value other than perhaps to nature but if you apply human labour to it and carve it into an axe handle you now have something that has wealth and that becomes part of the wealth of the nation at least for the couple of generations until it you know deteriorates and we used to make things in this country and and Finance used to be this boring green eyeshade bankers hours the banker lived in the middle-class neighborhoods what happened once we took our foot off the neck of Wall Street it became a gigantic casino again now was this are you Tom on 99 and and 2000 the Commodity Futures Modernization Act actually starts early well starts in the late 70s with Carter it proceeds during Reagan it accelerates during the Clinton administration and then all the things that you discussed that created the ability for these hedge funds and the large banks to go wild now think about this Apple in 2010 made about 20 billion dollars a hedge fund with a hot apple had seven hundred thousand employees around the world and contractors and actually made products right that we like a a hedge fund made exactly the same amount with less than a hundred employees how do you do that how do you do that you take you don’t make right root acres the people who are siphoning off our wealth are these hedge funds right now we don’t even know they’re working in the shadows we don’t even know they exist they’re stretching the whole income level the district the distribution of income in the United States is being stretched way out of proportion by these guys they make estimated the top ten hedge fund guys make 40 times as much as the top ten movie stars and we and and what they do for the economy is virtually zilch as far as I can tell you know a Jim Cramer the guy from Mad Money he actually confesses he ran a hedge fund for ten years and then ten years later he actually confessed on a website and he said that everything he did was fiction he used to manipulate his fellow reporters on CNBC by giving them false tips so his hedge fund could make bets based on the false tips he said if you are not one Alessi not in jail because it was ten years later statute of limitations and he said if you’re not willing to do these things you should not be in the hedge fund business well then why you know if this is putting our economy at risk its siphoning money out of out of the middle class it’s grids reading huge economic distortions I mean were wealth inequality in the United States is among the worst in the world now where as you know but when Reagan came into office we were pretty reasonable in the minute we have left here is anybody gonna do anything about this are there any serious efforts I Elizabeth Warren iota talks about this well you know we were we had a chance during the Occupy Wall Street period had that turned into a sustained populist movement I think we could have done after these guys you know the California Nurses Association National Nurses United is pushing the financial transaction tax the Robin Hood Tax that’s he critically important for this because these folks are extracting a hidden tax from us if we had a tax on their rapid sales of stocks and bonds right we we could have free higher education imagine that Stud tax we had in the United States from I think was 1898 until 1964 as I recall and and and FDR kicked it up in 35 to pay for the sec if my recollection is right it was we look you’re 11 countries in Europe are signed to institute one of these taxes I asked Ben little tiny tags on each stock I asked Tim Geithner’s office whether he would support it and he came up with all these you know they came up with these excuses about how they thought it would be inefficient and it wouldn’t be able to keep up with the competition meanwhile the competition is instituting in other words the the billionaires the hedge fund guys have so much money that they basically own this city Devin absolutely and the way to get them ultimately is we’re gonna have to build an independent populace and anti elite financial leap program and constituency we’re gonna have to do what you love Leslie thanks so much thanks a lot through the book how to make a million dollars an hour why hedge fund managers are out why hedge funds get away with siphoning off America’s wealth thanks thank you

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