Welcome Les Leopold (Salon.com) (HuffingtonPost) and Host Maureen Tkacik (TheNation)

How to Make A Million Dollars An Hour: Why Hedge Funds Get Away with Siphoning Off America’s Wealth

A lot of people think superrich hedge fund managers don’t pay high taxes, but they sure don’t see it that way. Take John Paulson. 2010 wasn’t even his best year, but presuming the IRS got the same 13.9% chunk of his 2010 income that it got from Mitt Romney, his tax bill alone would comprise the combined pre-tax 2010 income of which of the following group of 2010 Top 10 earners in other less sophisticated/innovative sectors of the economy:

1. James Cameron, James Patterson, Jamie Dimon, Jerry Bruckheimer, Jerry Seinfeld, Bono, Bon Jovi

2. Oprah Winfrey, Lady Gaga, Stephen Spielberg, Stephen King, J.K. Rowling, Dr. Phil, Philippe Dauman

3. Tyler Perry, Oprah Winfrey, Lebron James, Tiger Woods, Will Smith, Kobe Bryant, Dave Matthews Band

4. Charlie Sheen, Howard Stern, Tiger Woods, Kobe Bryant, Simon Cowell, Larry Ellison, Oprah Winfrey

5. Elton John, George Lucas, Ray Irani, Oprah Winfrey, Angelina Jolie, Paul McCartney, David Beckham

Okay, I give up. NONE OF THE ABOVE. While all of the groups listed above could afford to pay front runner-up hedge fund manager Ray “Hyena” Dalio’s $430 million tax bill, none managed to scrounge together enough to cover 13.9% of John Paulson’s $4.9 billion paycheck, which is why you should immediately buy Les Leopold’s How To Make A Million Dollars An Hour: Why Hedge Funds Get Away With Siphoning Off America’s Wealth for anyone you suspect of having accumulated, through legal methods, a sufficiently substantial net worth to rule out “class warfare” as a natural small talk subject. Because if you’re not rich enough to know the law doesn’t apply to you, you’re not rich enough because you’re not in the hedge fund business.

Now for the bad news: Leopold doesn’t technically explain exactly how to go into the business of making a million dollars an hour, or even the $842,788 an hour average the top ten hedge fund managers made in 2010. The closest this book comes to financial self-help is Leopold’s fascinating chapter on Jim Cramer, wherein the hedge fund manager and CNBC personality repeatedly hammers home the importance of breaking the law. But for all the wage-earning suckers who hadn’t figured out that critical “bottom line” of success in 21st century America yet, that’s a pretty good place to start.


[As a courtesy to our guests, please keep comments to the book and be respectful of dissenting opinions.  Please take other conversations to a previous thread. - bev]

125 Responses to “FDL Book Salon Welcome Les Leopold, How to Make a Million Dollars an Hour: Why Hedge Funds Get Away With Siphoning Off America’s Wealth”

BevW March 2nd, 2013 at 1:51 pm

Les, Moe, Welcome back to the Lake.

Moe, Thank you for Hosting today’s Book Salon.


For our new readers/commenters:


To follow along, you will have to refresh your browser:
PC = F5 key, MAC = Command+R keys

If you want to ask a question
– just type it in the Leave Your Response box & Submit Comment.


If you are responding to a comment – use the Reply button under the number,
then type your response in the box, Submit Comment.

Les Leopold March 2nd, 2013 at 2:02 pm

Thanks for having me. And thanks for the excellent intro.

seaglass March 2nd, 2013 at 2:03 pm

OK, so why did they get away with it, beyond the obvious that they own DC?

Les Leopold March 2nd, 2013 at 2:04 pm

That a very good and very tough question. It started long before they owned Washington. It started with ideology of deregulation that began in the late 1970s. That allowed high finance to begin their casino games just like they had done in the 1920s.

dakine01 March 2nd, 2013 at 2:05 pm

Good afternoon Les and Moe and welcome back to Firedoglake this afternoon.

Les, I have not had an opportunity to read your book so forgive me if you address this in there. It seems that most businesses ‘invested’ in by the hedge fund managers wind up worse off as an organization in the end – more corporate debt, worse products, worse PR. I assume it is the money the hedge funds make that allows them to play “above the law?”

Maureen Tkacik March 2nd, 2013 at 2:06 pm

Welcome, Les! I loved and related to this book. One sentiment I found especially familiar (it’s also a recurring theme of Sheila Bair’s memoir) is in the chapter on Magnetar, where you admit how naive you were back in 2008. Having followed all this pretty closely for the past five years I feel like I find a new reason to feel naive every day. What’s the biggest difference between your opinion about the financial system in 2013 vs. 2008?

BevW March 2nd, 2013 at 2:06 pm

Les, as a definition – what is a “hedge fund manager”? how is this different for any Wall Streeter?

Les Leopold March 2nd, 2013 at 2:06 pm

Yes. I think that most of would classify what they do as a form of cheating. But within the hedge fund world it looks quite normal.

PhilPerspective March 2nd, 2013 at 2:06 pm

What can be done to significantly reduce the power of people like Paulson have over our government?

seaglass March 2nd, 2013 at 2:08 pm
In response to Les Leopold @ 4

So, your saying we’ve returned to the Casino economy of the 20′s? It sure feels more like the Depression economy that followed the 20′s.

Les Leopold March 2nd, 2013 at 2:08 pm

Ok. First of all a hedge fund is a kind of investment fund for very wealthy institutions and investors. You need a minimum of a million bucks to play.

The difference between 2008 and now for me is that I think that many Wall Street functions should no longer exist at all. Much of what goes on is beyond simple reforms.

BevW March 2nd, 2013 at 2:08 pm

As a technical note,
there is a “Reply” button in the lower right hand of each comment. Pressing the “Reply” will pre-fill the commenter name and number you are replying to and helps for everyone in following the conversation.

(Note: If you’ve had to refresh your browser, Reply may not work correctly unless you wait for the page to complete loading)

Les Leopold March 2nd, 2013 at 2:10 pm

I agree with your characterization of a Depression economy. I was referring to the deregulation that began in the late 1970s and then picked up speed in the 1980s and 90s. We forgot everything we learned as a result of the 1929 crash. Then we put our foot on Wall Street’s neck and we created a remarkably stable economy. Then we forgot which sent us back to an era of immense speculation and destruction.

Les Leopold March 2nd, 2013 at 2:11 pm

Actually, I want to clarify my use of the word casino. What goes on in hedge funds and big banks gives casinos a bad name. Casino games are regulated. The odds are known. The games in Las Vegas are not rigged. Not so on Wall Street.

Maureen Tkacik March 2nd, 2013 at 2:13 pm

Another thing I found fascinating about the first chapter in which you ever so subtly attempt to foment intra-Top 1% class warfare, is that even high level CEO compensation is really so puny compared to hedge fund money. It’s a common refrain to question whether fed presidents making $400,000 a year or credit rating analysts making $600,000 a year (to say nothing of SEC enforcement attorneys making $150, etc. etc.) can really police banks whose executives are making $20 million a year, but do guys like Jamie Dimon or Lloyd Blankfein really exercise any power whatsoever in an industry the share with guys like Stevie Cohen and Ray Dalio who are making 100-200 times their salaries?

Les Leopold March 2nd, 2013 at 2:13 pm

What do to about Paulson’s influence on government? The best start would be a financial transaction tax on Wall Street trades of all kinds. Next would be a massive change in the laws concerning money and politics. Finally, we should cap the size of hedge funds to no more than $1 billion.

Les Leopold March 2nd, 2013 at 2:16 pm

Maureen, you point is well taken. Our income distribution is completely out of control. It will ruin our democracy and our economy. The core of my exploration in the book is to figure out what value is produced for all that income. There’s supposed to be a relationship between money earned and the production of economic value. Well, in hedge funds there isn’t which means the activity is a rip-off. It should be stopped.

Les Leopold March 2nd, 2013 at 2:17 pm

Let me put in another way. This book is about the key driver of inequality — the obscene incomes garnered by hedge fund managers. It leads to what I call financial compensation envy — my contribution to the Freudian literature. Non-financial CEOs want the same kind of incomes they see these young guys get in hedge funds. “Hey I have 50,000 employees and they have 50 but they make 100 times more than I do?”

That’s one of the reasons for the enormous jump in CEO income. In 1970 before the orgy of financial deregulation set in, the top 100 CEOs averaged 40 dollars income for every $1 earned by the average worker. By 2006 it had jumped to $1726 to $1.

So the question is how do hedge fund managers make so much? What value do they produce for the economy? Not much is the answer I found. In fact, they produced an enormous amount of negative value leading up to the crash.

BevW March 2nd, 2013 at 2:18 pm

Les,
If you are responding to a comment – please use the Reply button under the number.

seaglass March 2nd, 2013 at 2:18 pm
In response to Les Leopold @ 13

Isn’t it more then just deregulation? Isn’t it also “capture” and the revolving door as well? Hasn’t Wall st. and the other huge Corps. learned how to turn the rule makers gainst us and for them? Isn’t it also the courts that they now own and the pols they buy by the container that have made the almost the whole economy a huge scam machine that just feeds money to the top on a 1 way conveyor belt.

Les Leopold March 2nd, 2013 at 2:18 pm
In response to BevW @ 19

Sorry, will do

Les Leopold March 2nd, 2013 at 2:20 pm
In response to seaglass @ 20

Yes, what you say is certainly true now. But I was also trying to understand how we got here. The country was much more egalitarian between 1935 and 1980. Why? and how and why did it change?

Les Leopold March 2nd, 2013 at 2:23 pm
In response to seaglass @ 20

In addition to regulation, we had a sea change in economic policy. The idea was that tax cuts, especially for the rich + deregulation would make all boats rise. Didn’t work but that didn’t stop the ideology from spreading.

wigwam March 2nd, 2013 at 2:23 pm

Hi Les,

So exactly what do hedge funds do that’s so different from any other funds?

BevW March 2nd, 2013 at 2:24 pm
In response to Les Leopold @ 22

Between 1935 and 1980, didn’t the Fed come in to major influence on the economy? President Truman if I remember.

Les Leopold March 2nd, 2013 at 2:25 pm
In response to wigwam @ 24

They can invest anywhere, using any and all means of trading instruments. Unlike mutual funds they have no constraints. They are also incredibly secretive. The disclosure rules are weak.

spocko March 2nd, 2013 at 2:25 pm

Then we put our foot on Wall Street’s neck and we created a remarkably stable economy. Then we forgot which sent us back to an era of immense speculation and destruction.

I know you are the expert in this, but did we really “forget?” I’m pretty sure there is a platoon of highly paid lobbyists who have been working this issue so they could have speculation and that it was legal.

I think that lobbying firms are the most powerful entities in the country right now, could you please name some of the name of the Lobbying firms and key lobbyist who protect the hedgefund people? Is there anything we can do to impact them?

Maureen Tkacik March 2nd, 2013 at 2:25 pm
In response to Les Leopold @ 18

One thing that fascinated me when I recently revisited Ross Perot’s 1992 campaign was his relentless focus on the TRADE deficit, and how smoothly the free trade lobby incorporated his rhetoric into their malevolent crusade against the federal deficit. But until our elites do something to ameliorate the trade deficit—which is to say, until dinosaurs come back and drop North Korean nukes on China?—can the financial system ever be a vehicle for anything more virtuous than gambling, embezzlement and money laundering?

Les Leopold March 2nd, 2013 at 2:26 pm
In response to BevW @ 25

Yes. But I think the key event was Greenspan getting into the act. After all he was an Ayn Rand follower and believed with all his heart and soul that unregulated markets always worked best. That ideology enabled hedge funds and banks to run wild.

Les Leopold March 2nd, 2013 at 2:29 pm
In response to spocko @ 27

It was a different kind of lobbying a generation ago. Economists like Milton Friedman made a very strong case to get the government out of the economy. Corporations wanted to respond to the growing tide of social justice activism that emerged in the 60s and 70s. It was an intellectual fight that progressives lost when it came to the economy.

spocko March 2nd, 2013 at 2:29 pm
In response to Les Leopold @ 23

Yeah, they think that way, cause they have yachts.

The next time I hear the “Rising tide lifts all boats” I’ll ask them, “So do you have a yacht? No? Well that metaphor might work for people in the yachting industry but for the rest of us it sucks.”

Maureen Tkacik March 2nd, 2013 at 2:29 pm
In response to spocko @ 27

there are SO MANY LOBBYISTS. citigroup alone—which seems to be the biggest designated toxic waste dump of the hedgefund industry—has hundreds. The biggest problem with lobbyists is that very few of them make nearly enough money to see how ludicrous it all is. The ones who see it get too disgusted to stay in Washington. HIGHLY recommend Jeff Connaughton’s book The Payoff for more on this.

seaglass March 2nd, 2013 at 2:30 pm
In response to Les Leopold @ 22

As I remember the mid- to late 70′s inflation set in and a profound sense of demoralization gripped the country, a kind of political and ethical exhaustion from the speed trip of the 60′s cast a pall over us. Reagan and his marketing and PR people used this Nat’l mood to sell us the hallucination of free markets and the pixie dust of deregulation and people lined up to buy it, desperate to escape the inflation and the economic maliase of what was called back then stagflation. Of course no one back then read the fine print on the labels of these phony products. It was just the beginning of a wild ride back to the bubble economy of the 19th and early 20th century that few remembered or feared by then. Now were back to the Depression and it’s just going to deepen as far as I can see.

Les Leopold March 2nd, 2013 at 2:31 pm
In response to Maureen Tkacik @ 28

The fundamental purpose of finance is to turn savings into investments. But with deregulation came a myriad of new investment vehicles that were incredible dangerous — like CDOs and such. Finance is supposed to be a relatively small part of a vibrant economy. Now it’s huge. Size really matters. It needs to be shrunk way back down to a proper size.

vagreen March 2nd, 2013 at 2:33 pm

Les, thanks for joining us today. This is the first time I’ve heard of your book, but I’m very interested. Could you tell us more about Jim Cramer and his emphasis on breaking the law?

Les Leopold March 2nd, 2013 at 2:33 pm

The question comes down to the creation of real value to society. I think I’ve successfully shown in the book that hedge funds and their cousins inside banks have found an enormous numbers of ways to cheat. And the massive incomes they receive not only boost inequality but their wealth comes at our expense.

Les Leopold March 2nd, 2013 at 2:36 pm
In response to vagreen @ 35

Jim Cramer (Mad Money host} is a riot. I actually enjoyed reading his book because at one level he was honest. He ran a hedge fund for 10 years and never claimed he was doing any good for society. But I found an interview that was later pulled from the Internet where he admitted that the key to his profits was cheating. He would use his comrades at CNBC to place false rumors that would help him win his stock bets. And he said that if you are not willing to break the law, you shouldn’t be in the game. An amazing admission.

seaglass March 2nd, 2013 at 2:38 pm
In response to Les Leopold @ 36

So what’s the end game here Les? It seems these pricks have won the game big time and so do we all end up as their vassals or serfs / peasants again, working on the their Baronial estates for a meal and a few hrs. of rest? I don’t see any way out of this spiral into neo-feudalism, but the guillotine once again.

Les Leopold March 2nd, 2013 at 2:38 pm
In response to seaglass @ 33

Yep. It appeared that Keynesian economics had failed during stagflation. So let’s try something new…How about giving the rich even more money and deregulating Wall Street?

VMT March 2nd, 2013 at 2:38 pm

Aside from their lobbyists, how many people in the hedge fund industry are we really talking about here? It doesn’t appear to be that many. It seems to me that one of the greatest advantages that financial elites have is simply the ability to meet in boardrooms, at polo matches, country clubs, and midnight orgies where they regularly communicate with each other on how best to inject their money into the political process and continue their subsidized privileges. They’re essentially organized crime syndicates that don’t really even need to hide.

Les Leopold March 2nd, 2013 at 2:40 pm
In response to seaglass @ 38

Well, I think Occupy Wall Street showed us what an answer has to look like. We need a mass movement that challenges financial elites. Before OWS the economic discussion was all about austerity — the Grand Bargain. Then OWS appeared and it was all about the 99%/1%. OWS vanished and we’re back to phony austerity. It’s about mass movements.

seaglass March 2nd, 2013 at 2:40 pm
In response to Les Leopold @ 37

Whose surpised that Cramer is a self confessed criminal, he knows that as long as you win big time your never going to be arrested or tried for anything. In fact, he’s just bragging isn’t he? SUCKERS he saying F*ck you morons you deserve guys like me is really what he’stelling us. I hate him and his whole smug criminal class.

Maureen Tkacik March 2nd, 2013 at 2:41 pm
In response to Les Leopold @ 30

I’m a bit of a Chicago School law and economics intellectual history buff/obsessive, which is to say I know enough about Friedman and Greenspan (and Hayek, Aaron Director, James Buchanan, Henry Manne, the efficient markets hypothesis and the Chicago diaspora that cropped up to groom men like your friend Don Boudreaux and the vast majority of GOP regulatory appointees at George Mason University etc. etc.) that very little surprises me about those guys. My suspicion is that the UChicago law and economics movement has been so much more powerful, influential, universe-altering etc. than anyone understands, and that includes Naomi Klein. In any case, I have often wondered, and your discussion of the underappreciated “insider trading is good for you” genre of legal scholarship reminded me of this, whether it’s not a coincidence that this reprehensible intellectual movement emerged in Chicago, not long after the town had established itself as our national organized crime headquarters. (Google “Burton Kanter” before you call me a conspiracy theorist, guys.) Sometimes it seems like right wing/libertarian ideology was tailor-made to benefit exclusively crooks and cheats.

Les Leopold March 2nd, 2013 at 2:42 pm
In response to VMT @ 40

There are about 8000 hedge funds. But the top 200 control the vast majority of the money. Most hedge funds have fewer than 50 employees. It’s an industry that has very little justification for its existence. Each chapter in the book focuses on a form of cheating. I just couldn’t believe what they get away with.

VMT March 2nd, 2013 at 2:42 pm
In response to Les Leopold @ 41

Sustaining OWS was impossible once season four of “Cake Boss” was announced.

spocko March 2nd, 2013 at 2:42 pm
In response to seaglass @ 33

When I traveled cross country back in 2010 I was asking people, “What do you think is more important for the country to focus on, the deficit or unemployment” It wasn’t scientific, but I talked to people in California, Nevada, Colorado and Nebraska. 9 out of 10 said jobs. The one who said, The Deficit was the owner of a chain of fast food restaurants.

I asked all of them if they had ever heard of Pete Peterson. Nobody had. I asked, ‘Would it surprise you to know that a multi-billionaire,Pete Peterson, is spending 1/2 a billion dollars to get the media to focus on the deficit?’ They thought that was interesting. Only the fast food mogul thought that there was probably some unions somewhere agitating for more jobs.

I think there is a profound sense of demoralized people in the world today because of the lack of jobs, but frankly I don’t want to hear about it either, it depresses me. Not having a lot of clients (or a full time job) is seen as a failure. It’s hard to say “those rich people are hurting me” because it seems so far away from my personal experience.

Les Leopold March 2nd, 2013 at 2:45 pm
In response to Maureen Tkacik @ 43

Funny you should say that. I’ve been exploring a book proposal that would allow me to go deeply into that history. I think we’re seeing a merging of sorts between the Ayn Rand form of outright vicious capitalism, and the Chicago gang. I think the Republicans have gone Randian and the Dems are now the free-marketeers. The progressives are nowhere to be found.

Maureen Tkacik March 2nd, 2013 at 2:46 pm
In response to vagreen @ 35

FYI, I discuss Jim Cramer at length here. He’s underrated in just about every way, I think.

VMT March 2nd, 2013 at 2:47 pm
In response to Les Leopold @ 44

It truly is astounding. The nice thing about the financial crisis is that it finally has revealed how utterly corrupt the “Free Enterprise System”. 20 years ago anyone who questioned the privileges of the financial elite was considered a “conspiracy theorist”, today the corruption is obvious.

seaglass March 2nd, 2013 at 2:48 pm
In response to Les Leopold @ 41

Les, I was just in DC with 50K protesting the KXL pipeline and Climate change and Obama and his gang were in Fla. sipping champagne and playing golf with Dirty Energy the very same hr. we marched past his house. UTTER contempt is how we were greeted. ONLY a massive revolt and revolution will stop this now Les, it’s gone way too far. The elites know this and are doing everything possible to fend it off. Had OWS not been run ( an oxymoron) by anarchists it might have set some real goals and staked out some real political turf. Instead, IMO it got taken over early from the inside by people who wanted it to stay a fuzzy drum beating dopathon like the way a lot of the early 70′s anti-war protests ended up.

Les Leopold March 2nd, 2013 at 2:48 pm
In response to spocko @ 46

I’ve been pondering that issue as well. Here’s a piece I wrote that goes into the issue of why debt mongering works so well.
Sequester This! How did we get here? How do we get out?

spocko March 2nd, 2013 at 2:49 pm
In response to Les Leopold @ 44

So you saw a lot of stuff they “got away with” anything that you wanted to tip off the SEC with? Or have then made everything legal?

Personally I hope that we can get some more into space exploration.

Les Leopold March 2nd, 2013 at 2:49 pm
In response to VMT @ 49

Very true. It’s also why I’m able to speak out on these issues. In fact, it’s even hard for conservatives to justify what Wall Street did and still is doing.

Maureen Tkacik March 2nd, 2013 at 2:51 pm
In response to Les Leopold @ 47

from the very beginning they’ve deliberately embraced a market segmentation strategy that has obscured the degree to which, just from a funding and PR standpoint and inter alia, Ayn Rand=Chicago=Neoliberalism=Freedomworks etc. Highly recommend The Road From Mont Pelerin to anyone interested in this.

Les Leopold March 2nd, 2013 at 2:51 pm
In response to spocko @ 52

There’s a big difference, unfortunately, between cheating and illegal. High frequency trading for example is legal. But it really amounts to picking the pockets of normal investors.

spocko March 2nd, 2013 at 2:52 pm
In response to Les Leopold @ 51

Yea, we had a Sequester Party last night. We watered down the drinks by 13% and cut back on Doritos by 9%. When the guests complained. I said, “In twenty years you will appreciate the sacrifices you had to make today.”

Les Leopold March 2nd, 2013 at 2:53 pm

Please forgive the self-promotion, but Alternet.org did a pretty good interview about the book.

seaglass March 2nd, 2013 at 2:53 pm
In response to Les Leopold @ 53

They don’t have to justify it. To them it’s just part of the deregulated LOL “free market” it comes under the old adage “let the buyer beware” and “never give a sucker an even break!”

Les Leopold March 2nd, 2013 at 2:53 pm
In response to spocko @ 56

You should do a book!

spocko March 2nd, 2013 at 2:54 pm
In response to Les Leopold @ 55

I was questioning Alan Greyson a few years ago about when will be get a HFT tax implemented. He was defeated, but he is back. What would we have to do to get a HFT tax set up? Anyone working on it?

VMT March 2nd, 2013 at 2:54 pm
In response to Les Leopold @ 53

I often view conventional liberals as the prime movers behind the financial corruption and conservatives as the champions of the military/industrial economic rot. There’s lots of crossover, though.

Les Leopold March 2nd, 2013 at 2:55 pm
In response to VMT @ 61

I’m not sure if the liberals are the prime movers, but nearly all the major party players want in on Wall Street’s wealth.

spocko March 2nd, 2013 at 2:57 pm

So, I know some tech billionaires and millionaires, but they are still geeks at heart, they value brains. They were cocky because of their brains not money, but some are still assholes.

What is the asshole to normal ratio in the hedgefund world? What kind of attitudes do you sense from them toward, “the little people?”
Is there anyone they are afraid of? If so, what can we do to make their fears come true?

Les Leopold March 2nd, 2013 at 2:57 pm
In response to spocko @ 60

Yes. The National Nurses United, a growing union, is pushing hard for a financial transaction tax. It’s a start.

Maureen Tkacik March 2nd, 2013 at 2:59 pm
In response to spocko @ 52

Hey fwiw i have started to think the SEC exists almost wholly as a (not particularly effective, but its budget has seen better days) PR organ at this point. Everytime I read a legal document that agency has produced I feel dumber afterwards, and often as though I’ve been destructively misinformed about the issue at hand. Almost nothing the government has produced has actually illuminated the crisis, in fact. Whistleblower lawsuits, the amended securities class action case against Citigroup filed in December 08, the big MERS RICO lawsuit, some of the Loreley (aka IKB) cases against banks w/r/t Magnetar—all are much better places to start. Better yet, read up on the S&L crisis and BCCI. (Unless of course you value your sanity etc.)

Les Leopold March 2nd, 2013 at 3:00 pm
In response to spocko @ 63

I think it’s a diverse group. But when you’re making that kind of money, you view yourself in a league unto your own. In chapter about Raj Rajaratnam, the hedge fund guy who was sentenced to 9 years, I came across an interesting statement by him. He was caught on the wire saying that the reason his source within Goldman Sachs was playing ball was because he wanted to jump from the $100 calls to the billionaire class. Now that blew my mind.

Les Leopold March 2nd, 2013 at 3:02 pm
In response to Maureen Tkacik @ 65

I thought the best government document was the one that had four cases studies — one was the infamous Abacus sgam between Goldman Sachs and John Paulson. When I wrote about that on Huffington Post, Paulson threatened to sue me.

Teddy Partridge March 2nd, 2013 at 3:02 pm
In response to Les Leopold @ 55

Why not, then, a movement to make illegal the central supports of the industry? Start by making high-speed trading illegal, short-time ownership illegal or very highly taxed such that the profit is gone from it.

What else would we need to make illegal in order to end the hedgies?

VMT March 2nd, 2013 at 3:02 pm
In response to Les Leopold @ 62

Yeah, I agree. I use the word “liberal” in the sense of Bob Rubin liberal or Bill Clinton liberal. Anyway, the greed of the party apparatchiks does make the prospect of some kind of accountability emerging before all out environmental collapse in terms of climate change seem pretty remote.

BevW March 2nd, 2013 at 3:03 pm

This week’s news –

Financial Transactions Tax Introduced Again—Can It Pass This Time?

Just like the Congress before this, and the one before that, the 113th Congress will have a financial transactions tax to consider—and its backers are confident that, this time, they can make it law.

Thursday morning in the US Capitol, Senators Tom Harkin and Sheldon Whitehouse, along with Representative Peter DeFazio, announced the latest version of a tax on Wall Street trading: it would place a small tax of three basis points (that is, three pennies for every hundred dollars) on most non-consumer trades. Senator Bernie Sanders is also a co-sponsor of the legislation, as are nineteen members of the House.

Maureen Tkacik March 2nd, 2013 at 3:03 pm
In response to spocko @ 63

Lucky for you, I read The Ex Mrs. Hedgefund so you don’t have to:

Not all hedge fund guys were like that. I’d studied the scene up close, and Kiki and I had decided there was a link between the style of the guy and the type of hedge fund he worked in. For example, at the quantitative style funds, where mathematical formulas and computer software helped determine investments, at the helm was a nice power-nerd type, who loved his wife and kids and didn’t care about “the scene.” Contrastingly, both the “global macro” type firms (who put their wedding rings in their pockets on Boondoggles) and the equity hedge funds (preppy white-shoe types, including scattered “Tiger cubs” from the once allpowerful Tiger Management) were way more life-in-the-fast-lane: jets, cars, wine, women, and song—the works.

Les Leopold March 2nd, 2013 at 3:04 pm
In response to spocko @ 63

There’s a special relationship between money and brains. I think these guys believe that money = brains. Yes they are all smart about investing and making their moves. But because they walk off with so much money they think they are experts about everything. I think that may be endemic in successful hedge funds.

Les Leopold March 2nd, 2013 at 3:05 pm

I’m with you. Your suggestion would go a long way to ending the game. I also think you need to limit size as well.

Les Leopold March 2nd, 2013 at 3:06 pm
In response to BevW @ 70

I suspect we’ll be the last country to adopt it. 11 European countries are going to put one in this spring.

Maureen Tkacik March 2nd, 2013 at 3:08 pm
In response to Les Leopold @ 67

Haha, when I was writing about the selfsame thing for AOL, Magnetar somehow learned about it and had Steve Lipin threaten me before I’d even called anyone. What’s a few hundred or at best a thousand dollars an hour to fuckin these guys, a subatomic particle really

Les Leopold March 2nd, 2013 at 3:09 pm

Again, I want to stress that we have no prayer about doing anything much about inequality until we contain elite hedge fund incomes. I think they are vulnerable because so much of what they do is harmful or lacks any real value. That’s why they want to shut down all critics, even folks like me. (That story is in Chapter 12.)

Maureen Tkacik March 2nd, 2013 at 3:10 pm
In response to Les Leopold @ 72

i love the part of Suskind’s Confidence Men where Alan Kreuger explains somewhat sheepishly that Larry Summers believes everything Larry Fink says because he’s the richest guy he knows.

Les Leopold March 2nd, 2013 at 3:10 pm
In response to Maureen Tkacik @ 75

Hey we need a Hedge Fund Critics Defense Fund.

Les Leopold March 2nd, 2013 at 3:11 pm
In response to Maureen Tkacik @ 77

What a switch from when Robert Kennedy used to scoff at people who did nothing but make money.

Les Leopold March 2nd, 2013 at 3:14 pm

Actually, I must admit I was unnerved when they came after me. It was chilling to find out that anonymous people were trying to find out what I’d be writing about next. I could feel the intimidation and in the short run it worked. These guys will play hardball when threatened. Why? Because they fear that even a two-bit blogger like me could spark something that could lead to an investigation of them…or even jail. Why? Because they know they are skating out to the ethical edge…and well beyond.

Maureen Tkacik March 2nd, 2013 at 3:15 pm
In response to Les Leopold @ 76

SO TRUE. Although of course this is the diametric opposite of what anyone who has any power whatsoever in either political party (but especially the Dems, who don’t have the diversified oil/defense contractor backing of the GOP) will assert about the matter. I think we have to incentivize our oligarchs to get into industries that actually create jobs. Obviously China does this really effectively, otherwise guys like Terry Gou wouldn’t bother with the freaking 1% operating margin Foxconn manages to eke out making our iPads.

bigbrother March 2nd, 2013 at 3:15 pm

Les that is a great observation! I will read the book. Cheating is in fact a part of our educational system on test term paper etc. Weare a cuklture of liars led by the corporate culture. When this was globalized it was to be on steroids. With huge banking giants rigging interest rate, laundering drug and terrorist money the rue was cheat cheat cheat. Regulatory played along with minor fines.
Rank Bank Country AUM ($bn)
1. Bank of America USA $1,671.00
2. UBS Switzerland $1,554.53
3. Wells Fargo USA $1,300.00
4. Morgan Stanley USA $1,219.00
5. Credit Suisse Switzerland $843.32
6. Royal Bank of Canada Canada $573.32
7. HSBC UK $377.00
8 . Deutsche Bank Germany $348.60
9 . BNP Paribas France $316.20
10. JPMorgan Chase USA $291.00
11. Pictet Switzerland $262.11
12 . Goldman Sachs USA $227.00
13 . Citigroup USA $208.00
14 . ABN AMRO Netherlands $189.98
15 . Barclays UK $182.71
16 . Julius Baer Switzerland $178.79
17 . Northern Trust USA $173.70
18 . Bank of New York Mellon USA $168.00
19. Crédit Agricole France $163.67
20 . Lombard Odier & Cie Switzerland $151.30

And the hedge funds play this circuit would you agree?

Les Leopold March 2nd, 2013 at 3:17 pm

But actually the form of cheating I found most revolting was the design of financial products so that they would fail…and so the hedgies could collect the insurance from that failure. That was an eyeopener for me. Imagine someone building a house that was designed to burn up so that they could collect the insurance on it. I swear that’s what was happening in finance. That’s what Goldman Sachs and Paulson got caught doing. GS paid a $450 billion fine. Paulson got to keep $1 billion.

Maureen Tkacik March 2nd, 2013 at 3:19 pm
In response to Les Leopold @ 80

Yeah, maybe I should start giving seminars for hedge fund crooks in How To Stop Worrying And Learn To Love Breaking Laws With Impunity Because There’s A Snowman’s Chance In Hell You’ll Go To Prison If You Are Rich/Morally Bankrupt Enough. I actually suspect Madoff could have gotten away with it if he’d been just slightly more of a psychopath.

CTuttle March 2nd, 2013 at 3:20 pm
In response to Maureen Tkacik @ 65

Aloha, Moe and Les…! Speaking of the SEC… Occupy The SEC Sues Fed, SEC, CFTC, FDIC, Treasury…

It’s frustrating to see so many nailing the coffin shut on the Occupy movement…! 8-(

One of the central issues raised from day 1 of OWS was to resurrect Glass-Stegall…!

Now, on different note, do either of you see any hope that the rapid development of a BRICS Development Bank, trimming the sails of the Hedge Funds…?

Les Leopold March 2nd, 2013 at 3:20 pm
In response to bigbrother @ 82

You might enjoy my rant about why we need to eliminate the big banks. Are Big banks a bunch of criminal conspiracies?

Maureen Tkacik March 2nd, 2013 at 3:21 pm
In response to Les Leopold @ 78

Seriously! Bess Levin at Dealbreaker could give us seminars. She’s been threatened SO many times…

Les Leopold March 2nd, 2013 at 3:23 pm
In response to CTuttle @ 85

BTW I blame the rest of us for OWS not growing into a larger, sustained movement. It showed us it could be done. We kind of missed the moment. But I think we’ll get another chance. I think the only way to handle hedge funds is to take away their toys — tax them heavily for short-term trades, and put a cap on their size.

Les Leopold March 2nd, 2013 at 3:23 pm
In response to Maureen Tkacik @ 87

We need to start an affinity group…really.

Maureen Tkacik March 2nd, 2013 at 3:26 pm
In response to Les Leopold @ 86

As complex and inscrutable and exhausting as most of the books and reports about them are, the BCCI/S&L scandals proved that they most certainly are, and that they pillage with impunity because they employ, bribe and smoke cigars with the uppermost echelons of the global political/military/intelligence establishment. But anyone researching that stuff should read this first and if you still think you’re up for it, google Gary Webb…

Les Leopold March 2nd, 2013 at 3:27 pm

Here are a few of the forms of cheating that we get into.
insider trading;
destabilizing countries
rumor mongering
media manipulation
designing products to fail.
high frequency trading
tax loopholes designed specifically for money managers

So the question always is: What is the value produced for the economy? I think I destroy the arguments put forth my the hedge fund cheerleaders.

bigbrother March 2nd, 2013 at 3:30 pm
In response to Les Leopold @ 88

With the advent of nano second computer trading algorithms when billions are traded in seconds it is beyond comprehension the risk leverage that is created. The global economy can get reduced in a day, week, month?

Les Leopold March 2nd, 2013 at 3:30 pm

A major reason for writing this book is to pierce their vail of legitimacy. When you give a $100 million to beautify Central Park or add a wing to the New York Library, you are a genius and a saint. No one asks where the money came from. But we need to ask and we need to show that it comes from what economists call “rent” which means rip-off.

Les Leopold March 2nd, 2013 at 3:31 pm
In response to bigbrother @ 92

Yes. In one of the chapters I interview two guys who have a small firm that protects clients from predatory trading. They are on a crusade to educate the public about the perils of this trading. The walked me through the flash crash of May 2010 when the Dow dropped 600 points in a few minutes due to the automatic trading. Had that happened at the end of the day, it would have led to a global panic…And for what?

Les Leopold March 2nd, 2013 at 3:34 pm

Also, I’ve found that folks don’t realize just how skewed the distribution of income really is. That’s why in the first chapter, I compared hedge fund elite incomes to our glamour stars of sports and entertainment. The top ten movie stars make about $23,000 an hour — not chicken feed. The top ten hedge fund guys average over $800,000.

Maureen Tkacik March 2nd, 2013 at 3:35 pm
In response to Les Leopold @ 39

Another book that really got me thinking was Jeff Madrick’s Age of Greed. He unearthed an alternate and much more coherent explanation for 1960s-1970s inflation once advanced by Henry Kaufman and Albert Wojnilower wherein inflation was triggered by the emergence of negotiable CDs and also petrodollar recycling. Negotiable CDs begat “money brokers” like the infamous Mario Renda of S&L crisis fame, and petrodollars/Eurodollars begat a surplus of “hot money” chasing yield. I would throw the condo craze and Fannie/Freddie into this mix. But basically deregulation absolutely created inflation. Look at what the CPI did throughout the 1950s—it’s like, astonishing. (Negotiable CDs and condominiums both “invented” in 1961.)

spocko March 2nd, 2013 at 3:35 pm
In response to Les Leopold @ 80

Yep. As I have said, you want to really get people’s attention you get between them and their money.

I asked Matt Taibbi what the Goldman Sachs guys were afraid of, ‘He said, ‘Not journalists”

Here we are talking about how serious they take your articles, that is the reason that financial “journalists” don’t often take on these guys. They know how to intimidate.

I often wonder why individual companies don’t go after hedge fund guys who messed with them. Then I found out that they do! They just hire more lawyers and keep the case in court, something a business that needs to make products shouldn’t have to be spending time and money on.

bigbrother March 2nd, 2013 at 3:36 pm

Only 12.99 at Amazon! An activist bargain! Maybe FDL could send one to each of the biggest hedge funds? Really good salon.

Les Leopold March 2nd, 2013 at 3:36 pm
In response to Maureen Tkacik @ 96

I’d also throw in the oil shocks, which themselves were a reaction of rising inflation.

Les Leopold March 2nd, 2013 at 3:37 pm
In response to bigbrother @ 98

many thanks

Les Leopold March 2nd, 2013 at 3:38 pm
In response to spocko @ 97

Are you watching the battle between vulture hedge funds and Argentina?

Les Leopold March 2nd, 2013 at 3:39 pm

Let me ask this: Do you think that an anti-Wall Street movement can be put together?

Les Leopold March 2nd, 2013 at 3:41 pm

One more matter of self-promotion. I promise that this book is accessible. I am not a financial guru or insider. But I take pride at making complex economic ideas accessible to lay readers. I run economic workshop for unions and community groups on a regular basis. So I try real hard to make the concept clear. Also I promise you that the books is written better than this stuff you’re seeing from me here. Re-writing and good editing really helps!

CTuttle March 2nd, 2013 at 3:42 pm
In response to Maureen Tkacik @ 90

*heh* In ’91 Brennan was already ensconced in Riyadh, scheming away…!

dakine01 March 2nd, 2013 at 3:44 pm
In response to Les Leopold @ 102

Isn’t that to an extent, the start of Occupy Wall St?

spocko March 2nd, 2013 at 3:45 pm
In response to Les Leopold @ 102

Yes. In one of the documentaries about OWS I spotted THE group of people I was most interested in . They were people who worked in the industry and had retired rich. They saw the corruption and theu know not only the tricks that the people use to fleece others, but how they avoided being caught before and the techniques they would use when they were caught. I call it the “It Takes a Thief” theory of attack.

Now, what they need is a team of a prosecutor, body guards, and media experts to act.
They can work with Warren now that she is in the senate so they will have some high level support politically.

This team exists, what I don’t know is what they are up to now.

At one time Elliott Spitzer could have been that prosecutor, but he got taken down for costing Wall Street some money. To do this work you have to become an “Untouchable” and we know how hard it is to find someone who can’t get “got to”

Les Leopold March 2nd, 2013 at 3:45 pm

Here’s another Huffpo piece I think you might like: Inequality is worse than you think.

spocko March 2nd, 2013 at 3:45 pm
In response to Les Leopold @ 101

No. Interesting?

Les Leopold March 2nd, 2013 at 3:46 pm
In response to dakine01 @ 105

Yes. But how do we get it going again?

Les Leopold March 2nd, 2013 at 3:47 pm
In response to spocko @ 106

I fear that the main body of the progressive movement is siloed into issue areas to the extent that they can’t break out to build something larger. I’m trying hard to help, in some small way, to break through.

Maureen Tkacik March 2nd, 2013 at 3:49 pm
In response to Les Leopold @ 83

In 2004, CDO issuance was like $160 billion. In 2005, $250 billion. 2006: $680 billion and 2007: $480 billion. More than a trillion dollars in CDOs issued AFTER the housing bubble officially ended. AFTER everyone know HPA was going to be flat at best 2006. AFTER just about everyone had figured out that most CDOs would be wiped out if HPA was ANYTHING LESS THAN 6% PER ANNUM IN PERPETUITY FOREVER AND EVER. The *entire* MBS CDO market was rigged. And that’s not even getting into the heart of what was wrong with MBS-es, which is that they were completely idiotically structured. (among other things.) I have come to believe that the larger problem is…that those Glass and Steagall guys were actually right about EVERYTHING and that the minute the banking system succeeded at chipping away at it ponzification was a done deal. Sheila Bair’s book reinforced this notion for me. The FDIC was ingeniously designed in many ways.

dakine01 March 2nd, 2013 at 3:50 pm
In response to Les Leopold @ 109

Depending on where you are, it never went away. I think it is one of those issues that is cumulative. There will be another investment bubble, there will be greed and corruption that will give some more headlines. The denials from the MOTU will ring that much more hollow, etc etc etc.

Just another of the many critical issues facing us

Les Leopold March 2nd, 2013 at 3:50 pm
In response to spocko @ 108

Very. Argentina defaulted on its debt and worked out a deal to pay 33 percent on the dollar. Nearly all the bond holders accepted. However a few vulture hedge funds bought up bonds cheaply and are demanding full payment. They got a court to allow them to impound an Argentinian training ship. An appeals court has just ruled in favor of the hedge funds.But Argentina refuses to pay them full value. Stay tuned.

spocko March 2nd, 2013 at 3:50 pm
In response to Les Leopold @ 110

I hear you. It’s hard.

Maureen Tkacik March 2nd, 2013 at 3:51 pm
In response to spocko @ 106

there’s a really great OWS group filled with lots of finance insiders that meets on Sunday afternoons at Columbia for all in New York. It was my favorite OWS affiliated thing when I was in NY

CTuttle March 2nd, 2013 at 3:52 pm
In response to Les Leopold @ 110

…is siloed into issue areas to the extent that they can’t break out to build something larger…

The real problem is that there’s Too Many issues that needs to be addressed immediately…! 8-(

Les Leopold March 2nd, 2013 at 3:53 pm

The ponzification was even worse than I had realized. Bank A shuttled off their junk to Bank B which then sold it to Bank C which then sold it back to Bank A. Each time they racked up a profit.

BevW March 2nd, 2013 at 3:53 pm

As we come to the end of this great Book Salon discussion,

Les, Thank you for stopping by the Lake and spending the afternoon with us discussing your new book and the problems with hedge funds.

Moe, Thank you very much for Hosting this great Book Salon.

Everyone, if you would like more information:

Les’ website and book

Moe’s website

Thanks all, Have a great weekend.

Tomorrow: David Brin (multiple Hugo, Nebula, and other awards), with his new book: Existence (novel); Hosted by FDL’s Siun.

If you would like to contact the FDL Book Salon: FiredoglakeBookSalon@gmail.com

FDL Book Salon has a Facebook page too

Les Leopold March 2nd, 2013 at 3:54 pm
In response to CTuttle @ 116

agreed but if we all spent just a little time on the Wall Street issue too? Imagine if every progressive organization in the NY area sent one staffer each day to OWS back when. We would have had 20,000 people each day instead of 1,000 at best. Each day!

Les Leopold March 2nd, 2013 at 3:56 pm
In response to BevW @ 118

Many thanks to FDL and Maureen for having me here. Let’s hope we can all work together to build a more healthful and just society. best, Les

Maureen Tkacik March 2nd, 2013 at 3:56 pm

Also, folks: want to reiterate. GET THIS BOOK FOR THE REPUBLICANS IN YOUR LIFE (ESPECIALLY IF YOU HAVE REPUBLICANS IN YOUR LIFE WHO ARE REALLY SICK OF LISTENING TO YOU.) Any but the most venal/meatheaded will be outraged and also amused, I think. Somehow Les has not allowed himself to become one of those people who just gives up on “this fucking fascist kleptocracy of ours”, and he sustains a fresh narrative here

CTuttle March 2nd, 2013 at 4:00 pm

Mahalo, Bev, Les, and Moe, for another excellent Book Salon…!

Les and Moe, Mahalo for y’alls significant efforts, please stop by the Lake more often…! *g*

Maureen Tkacik March 2nd, 2013 at 4:02 pm

thanks bev, les and FDL. These salons are always such a gratifying antidote to the rest of the discourse…

CTuttle March 2nd, 2013 at 4:06 pm
In response to Les Leopold @ 119

I agree 100%…! Occupy Hawaii celebrated it’s one year anniversary last month, and we’ve scored some tangible local victories in our County and State legislatures, on an array of issues, so we must Keep on, keeping on…! ;-)

meepmeep09 March 2nd, 2013 at 4:08 pm

Damn, what a great discussion, daunting and grim though the topic may be. Great to see Spocko show up here too; always adds much value to any discussion.

For fellow Twitter users:
@moetkacik (she despises Twitter, btw; you should follow anyway); and
@les_leopold

Sorry but the comments are closed on this post