Fumbling the Carried Interest Debate Again: Random Shots
By Chris ClairFresh off its failed attempt yesterday to host a coherent debate on the merits and drawbacks of a carried interest tax, CNBC gave it another go today. This one didn’t go much better than yesterday’s, although at least today the guests allowed one another to finish their thoughts. It devolved pretty quickly at the end, though, with the standard TV reminder that “this is TV” and we can’t spend all day on this stuff. There’s just no point to these segments, other than to fill time.
USA! USA!
Not to pick on CNBC, but what was up with Mark Haines’ tie this morning? If he explained it, I missed the explanation. But in a way I’m glad he wore it. Sometimes I forget what country I’m living in, and an American flag tie always helps, as do the flag pins, flag underwear, flag beach blankets, flag-colored motorcycle gas tanks, flag T-shirts and flag hats.
But what do these folks do with their flag items when the wear out? Googling “American flag underwear disposal” provides no useful official answer to this question. So Mark, what happens to the silk tie when it wears out?
Stranger and stranger
This one has legs, folks, for good or ill.
Gawker: Reuters Chief Accused of Caving to Hedge Fund; ‘Not a Bad Story … Could Have Run’
And, veering into the bizarre, TalkingBiz: Reuters global company news editor mocks furor over killed story
January 19th, 2010 at 6:38 pm
There is a significant nuance to this of which many seem unaware. In the non-hedge fund context, many of the managers/principles entitled to receive carried interest have also personally guaranteed the loan. This is especially true in commercial real estate deals. Initial loan amount will often exceed equity by a factor of 3 to 1, and the manager has his entire net worth on the line.
I agree in principle with taxing carried interest receipts (in excess of investment) as ordinary income, but the guarantors risk should be given some credit. Thinking about this, my modest proposal would be credit the guarantor/manager for an investment valued at the lesser of (1) loan amount guaranteed and (2) net worth of guarantor at risk (taking into account assets unreachable as a matter of law) minus total other debt guaranteed by that guarantor.
Does anyone else understand what I’m saying here? I certainly haven’t seen this argument in print.