The Non Required


I want to be a private equity pig
August 5, 2007, 11:38 pm
Filed under: Big deal, C'est triste

Henry Kravis, Stephen Schwarzman, Peter Peterson. Ring a bell? Maybe not. Those guys are the princes of private equity (the key buzzword in B-schools nowadays). According to Forbes, Kravis is worth $2.6 billion. Peterson made $1.88 billion when his ludicrously Savile Row named Balckstone Group went public last month. So, who wouldn’t like to be a private equity king?

Property is a freedom dear to all of us. We’re all greedy. Especially Kravis & Co. Henry and his friends have paid a visit to the Congress wielding their check books in an effort to save a tax provision that allows them to pay an income tax of 15% rather than the normal rate of 35%. Basically, those guys want to enjoy a lower tax rate than the people who clean their toilets. I just love this move. My friend, that’s capitalism, the magic supposed to turn our individual greed into general prosperity.


13 Comments so far
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Ok, those guys from KKR are billionaires and they may pay only 15% of Income tax this year (which is already a huge amount by the way) but do not forget that Private Equity firms are in general really adding value to different firms that they own. A recent study from BBG magazine showed that as those PE gurus are bringing with them corporate knowledge , Industry expertise, cash flows to balance sheet; during last 50 years, corporate company formerly owned by Private Equity posted +20%-30% higher Income than regular company in similar industry. Don’t be jaleous, work hard and may be one day, KKR will come and buy your company so you can retire in your beautifull island with prosperity.

Comment by Nj

Nj. I have so much to tell you…
(1) Merit is no basis for justifying such a behavior. Private equity may contribute to make our world a better place. I agree. But, it’s also good to have someone else clean our toilets, right?
(2) Arithmetics can help. If 15% of $x billion is a huge amount of money, isn’t 65% of $x billion a decent enough amount to live with?
(3) “(…) work hard and maybe (…) one day you (will) retire in your beautiful island with prosperity.” Hum… Do you really think that only lazy people end up cleaning your toilets?
(4) Jesus was a good bloke. “And Jesus sat over against the treasury, and beheld how the people cast money into the treasury: and many that were rich cast in much. And there came a certain poor widow, and she threw in two mites, which make a farthing. And he called unto him his disciples, and saith unto them, Verily I say unto you, That this poor widow hath cast more in, than all they which have cast into the treasury: For all they did cast in of their abundance; but she of her want did cast in all that she had, even all her living.”

Comment by tnr

Hey a bible reference🙂. Tnr, you are truly multi-talented. This has the potential to become a fascinating argument so I will grab a chair and some nachos. I will just add that if somehow whatever profits they make from the tax break is used for buying safer uniforms for janitors….
PS: I could not solve your riddle😦

Comment by lova

Lova. Glad you enjoy the show and let’s hope Nj brings in his bazooka !
PS: You can now put the pieces of the puzzle together.

Comment by tnr

For sure, the same amount doesn’t count the same value. Though, please agree with me that we participate differently to the global economy. If one can give 1 million, let him do so. If one want to save 1 million, that’s right for him!
These last weeks, bloggers all around here were fairly proud of helping orphans. How much did they collect?
If tomorrow, one of of these PE pigs decides to spend a little contribution to Africa, I’m quite sure “little” means “too much” for most of us…
Business and ethics paradoxically live together.

Comment by vaomiera

Vaomiera. Pleased to welcome you onto our humble blog. I agree with you on 2 points: we all contribute differently to the global economy, and if one can give $1 million let him do so. For the rest, I’m sorry but I have to disagree.

Your argument is build around a very strong concept: contributing to the world, and helping others. A truly noble purpose. But do you really think that the world would be a better place if we pay less taxes – and especially if THEY pay less taxes? Come on… Those guys are unpatriotic ingrates who won’t share with their country even a fraction of the blessings that it has bestowed so spectacularly on them!

As far as their helping Africa is concerned, I am doubtful about that. Peterson was one of the great deficit bores of the 80s and the 90s in the US, warning about the huge gap between what society had promised people and what would be available to keep those promises. After such words and the $2 billion he made with his IPO, he had an opportunity one would have thought he would be unable to resist. And what happened?

Comment by tnr

It would be more 7% than 15%, the 15% rate being the tax rate on capital gains, 35% is the rate applicable to income and wages.
See :
http://money.cnn.com/magazines/fortune/fortune_archive/2007/08/06/100141304/index.htm?postversion=2007072311

Otherwise, fine blog.

Comment by ratjohnson

Those guys are so smart and I can understand now why they became so rich🙂 By the way, this is just one example but don’t you remember a certan tax benefit that was issued for a certain period of time for all imported goods …

Comment by Nj

No bazooka :(….
Q: assuming the companies were built on the premise of creating wealth, aren’t they just doing what they do best ? Why would they stop now ?

Comment by lova

Of interest to this argument: from the Wall street journal: What is acceptable wealth ?
“When millions of people are dying from AIDS and malaria in Africa, it is hard to justify the umpteenth society gala held for the benefit of a performing arts center or an art museum. A thirty million dollar gift for a concert hall is not philanthropy, it is a Napoleonic coronation.”

Of course, Bill Gates and other, less well-known philanthropists are trying to fight AIDS and malaria in Africa. And Mr. Gross himself has given millions to philanthropic causes, including $23 million to Duke.

And there are plenty of rich people lobbying to keep their taxes right where they are. Today’s Journal has a fascinating article by Brody Mullins and Sarah Lueck about how the Democrats are losing interest in raising taxes for private-equity and hedge-fund billionaires. Maybe it has something to do with the Private Equity Council giving a couple of million dollars to Democratic candidates.

Yet I think comments like Mr. Gross’s will become increasingly common as the rich realize that even in America, acceptable wealth may have its limits. ”

http://blogs.wsj.com/wealth/2007/07/31/the-billionaire-class-warrior/

Comment by lova

ratjohnson. Glad you enjoy the ride. You’re right the tax outlay comes down to 7% which makes ‘pig’ the right word to use here.

Comment by tnr

Nj. Yep. They’re smart and loaded and selfish. And for fairness I need to quote you: unfortunately, business and selfishness often (paradoxically?) grow together.

Comment by tnr

Lova. Private wealth is the purpose of business and it has to continue to be that way. We however need not to be carried away by that sole argument. Wealth is to be shared for the welfare of all. The big question is: to what extent are we all to contribute? As for acceptable wealth, I am not sure we should set some limits (I really don’t wanna give away my huge yearly bonus! lol) – as long as the money is honestly earned and shared in a decent manner through morally acceptable tax rates.

Comment by tnr




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