Don’t you wish you were a hedge fund manager? Twenty-five of them made a total of more than $25 billion in 2009, at the same time that most ordinary folk in this country were out of work, worried about work, or working harder just in order to live poorer.
How did these best and brightest do it? What’s the secret of their titanic financial success? Great brilliance? Extraordinary vision? Wondrous contributions to the common good? Inherently superior personal abilities?
Not exactly.
These worthies are first of all the beneficiaries of what’s known on Wall Street as OPM — Other People’s Money. In this case, money from rich individuals and other investment vehicles that give hedgers vast sums in hopes of getting back great returns. Amazingly, even though in 2008 most hedge funds lost a ton of OPM, they still garnered enough in 2009 to play big time in a game, it’s now quite clear, they couldn’t lose. The game of investing in big banks, whose stock prices soared in 2009.
Now follow this. Many investors in hedge funds were rich individuals who worked for these banks, and a goodly chunk of money in hedge funds also came from investment vehicles of these same banks. The banks themselves made most of their own money last year not by lending to the rest of us, but by investing in the stock market. These banks’ books, in turn, were padded by money from the Fed (i.e. us, the taxpayers), while the market these banks invested in was a market pumped up by rising prices of bank shares that came in large measure from cheap loans made possible by Fed policies.
So here it is in a nutshell. Their secret for making a packet last year, and your own secret for making a billion dollars next year. Get institutions subsidized by the government (or these institutions’ well-heeled top people) to give you a ton of cash to invest in stocks that have to rise because they are artificially inflated, directly or indirectly, by taxpayer cash.
Easy? You betcha! Then take a chunk of this absolutely legal bonanza and hire lobbyists and publicists to prevent Socialist bank reforms by Congress. Claim that your enormous compensation is the result of your own and your investors’ risk-taking, rather than the uncompensated risk-taking of taxpayers. And show your great regard for lesser mortals by trickling down what you’ve so cunningly acquired via purchases of luxury goods and real estate (sales in this realm have been soaring of late).
Always remember. There’s nothing wrong with a top-light, bottom-heavy, two-tier society if you’re clever enough and wired enough to be very, very high up top, and very, very far from the bottom.