Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present by Jeff Madrick

Author:Jeff Madrick
Language: pt
Format: mobi, epub
Tags: Moral and Ethical Aspects, United States - Politics and Government - 21st Century, Financial Crises, Wealth, Financial Crises - United States - History, United States - Politics and Government - 20th Century, History, 21st Century, General, United States, Political Science, Wealth - Moral and Ethical Aspects, Business Ethics, Economic History, 20th Century, Business & Economics, Finance
ISBN: 1400041716
Publisher: Knopf
Published: 2011-05-31T00:00:00+00:00

15

George Soros and John Meriwether

FABULOUS WEALTH AND CONTROVERSIAL POWER

Until the mid-1980s, the takeover movement was the way to make the most money on Wall Street. Men like Henry Kravis, George Roberts, Boone Pickens, and Carl Icahn built enormous fortunes, and by the 2000s all were billionaires. Icahn was frequently listed among the twenty-five richest Americans, eventually with some $8–9 billion in personal wealth, and Kravis and Roberts were reported to have about half that.

Starting in the mid-1980s, managing hedge funds made more great fortunes for more people than the takeover movement did, and replaced them at the glamorous pinnacle of the financial community. By 2009, thirty-nine of the nation’s four hundred richest people were hedge fund managers, according to Forbes. What made this possible was the many new kinds of securities that had been created since the 1970s, the global reach of financial markets, and the light federal oversight of banks and investment firms endorsed so strongly by Alan Greenspan. Greenspan in particular encouraged regulation-free trading by new participants of all kinds.

Hedge funds were investment pools that were restricted to a hundred or fewer wealthy investors. Because these investors were presumably sophisticated, and could hire expert advisers, they were free of most SEC regulations about disclosure of information, or limits on debt. Unlike mutual funds, which usually emphasized stocks or bonds, they could invest in almost anything anywhere—financial and commodities derivatives, options of all kinds, currencies, and silver and gold. They could sell short to benefit from falling prices, borrow aggressively to multiply their potential returns, and invest in any country they deemed appropriate.

The hedge fund managers got so wealthy because they could borrow aggressively against their assets and they took a large share of the annual investment profits—usually 20 percent, as well as 1–2 percent of the asset value annually. They had to convince wealthy investors to agree to the terms, of course, and this they did in growing numbers. In the 1980s and early 1990s, the returns in some hedge funds far outpaced the returns of the more conventional vehicles. In the late 1980s, hedge funds managed less than $100 billion in funds, in the late 1990s, some $400 billion, and in the mid-2000s, $2 trillion. When they borrowed multiples of that, their buying capability became enormous.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.