Benevolence or guilt?

Although I’m smiling here and holding loads of money, I really feel the pain of the lower income classes. Seriously.  *not an actual hedge fund manager (I think)

A story from CNBC today made me ask that question.  It seems as though there are some hedge fund managers who feel a bit of guilt about the disparate income inequality in the US.  The Wall Street Journal held a conference in New York that brought private equity together and the following quotes were made by some of the people in attendance.

  • “The inequality of income is unprecedented, particularly if you look at the median wage and the top 1 percent wage,” –Richard Robb, co-founder and CEO of $1.8 billion hedge fund firm Christofferson, Robb & Co
  • “There’s just a growing sense that post-crisis, post-’08, that the game isn’t fair.  We went out of our way to protect the financial economy and gave short shrift to other parts.” –Jim Chanos, founder of $5 billion hedge fund firm Kynikos Associates
  • “We believe that it is especially unfair that young children from underprivileged communities and working families pay the price for the legislature’s collective failures.” –John Arnold, 39-year-old billionaire former hedge fund manager
  • “This [government market stimulus] is fantastic for every rich person…This is the biggest redistribution of wealth from the middle class and the poor to the rich ever.  I mean, maybe this trickle-down monetary policy that gives money to billionaires (in hopes that) we go spend it is going to work…but it hasn’t worked for five years.” –Stanley Druckenmiller, retired founder of Duquesne Capital Management

Is it possible that there’s a bit of guilty conscience syndrome in the world of the 1%, or is this just an aberration that will disappear just as the ripples caused by skipping a rock across a pond?  Of course, there will be those “Free Marketeers” who will defend the “Invisible Hand” until their last breath, but it gives me pause to think that some hedge funders are capable of thinking beyond their own personal interests.  Maybe, just maybe, they are beginning to realize that the Invisible Hand is giving an invisible hand job to much of America without impunity.

Arnold and his wife, for example, donated $10 million dollars recently to Head Start programs to keep seven locations open.  There are likely other examples of philanthropy from this group that doesn’t make the headlines, so I won’t paint them all with a broad brush either way.  However, those quotes above do not appear to follow the norm based on what we see or hear in the news.

In a related story linked to the CNBC piece, there’s an interview with Mike Novogratz, of Fortress Investment Group.  In his interview, he’s pretty frank with his answers and doesn’t appear to hold back on what he truly thinks vs what he thinks people want to hear.  Two things that he says that stuck out to me were in relation to minimum wage workers.  One was an answer to a question about Wal-Mart workers and the other was part of what he thinks the government needs to do to combat inequality.

Many would argue that Wal-Mart is the quintessential company that exploited global trends over the last 25 years. Do you blame the likes of Wal-Mart for what is happening? Do you think they are being greedy?

Yes and yes. Wal-Mart (WMT) will make $15 billion this year. 49% is owned by the heirs and trusts of Sam Walton. They have 1.3 million workers who on average make around $12 an hour. So a full time employee, someone who works 40 hours a week doesn’t make a living wage. And the U.S. taxpayer subsidizes that wage bill with an estimated $1.5 billion a year. The family has net worth of over $130 billion. Something doesn’t feel right there, does it?

and then there’s this:

So, in the case of Wal-Mart, government subsidies of the poor employees make the founders even richer. What do you think that the government should do?


But, specifically, what changes need to be made?


Finally, the government needs to regulate minimum wage. An employee making minimum wage should not have to be subsidized by the government to live. A more comprehensive minimum wage system puts the responsibility back onto the businesses. It’s also a more dignified way at redistribution. I am sure those Wal-Mart employees would rather have that extra $2,500 a year come from their company as opposed to a government handout.

It’s somewhat interesting to see that coming from someone who’s part of the 1% even though he’s an admitted Obama supporter.  There may be hope for this country in the long run after all.  All this is for naught though, if Congress can’t perform their Constitutional requirement of funding our government and dealing with the debt limit.  One would think that people who tout the power of the market would realize that gainful employment of the citizens of this country would help our budget and debt issues more than anything else, but that’s a different post for a different day.


2 thoughts on “Benevolence or guilt?

  1. Unfortunately, I think this is more the exception than the norm. I do think that some way should be found for people working full-time jobs to not need to be subsidized by the government.

    I have a special dislike for Wal-Mart. It’s a constant struggle for their employees to stay above the 32 hour mark (the benefits threshold). I personally know a person who has been there 15 years that experiences this. Wal-Mart also receives a government subsidy for employing this person because they are handicapped. Not going to say how but I know this for a stone cold fact. They’re having their cake and eating it, too.

    For that matter, go into the break room of any big chain retail store (in GA) and you’ll see posters on the wall about how to apply for Peach Care and other similar things. As was said, government is subsidizing the cheap labor that these companies are profiting from (and quite handsomely in the case of the Waltons).

    Like any rational person (make up your own joke here), I know that you’re always going to have your top and your bottom but if a person is working and making an effort, they should be able to live a tad better than hand to mouth.

    But while I commend the people quoted above, I believe it’s an aberration. Then again, I’m not one who believes in the “basic goodness of people”; life has shown me that quite the opposite is true.

    I think in many ways it’s like a business; if the business is doing well, then everybody involved should share in the prosperity and if things aren’t going well, then everybody should get a share of the suffering. Nothing says the bottom guy in the company should get what the top guy gets but everybody should get to ride the same roller coaster.


    • Hard to find anything to add or take away from that one. I found it interesting that any of them would go on record saying those things though. I’ve been there working in those chain stores, and I can honestly say that I worked full time and was still able to collect partial unemployment pay while I was working to make up the difference between my actual unemployment amount vs what I earned working. The maximum unemployment amount in GA works out to $8.25 per hour, and I was earning $7.25 at the time. I was lucky in that my wife and I didn’t have major bills or kids to take care of at that time, so we were able to survive on both our salaries. A single parent or single income household wouldn’t be so lucky.


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