Congress to Discuss Private Equity and Hedge Funds at Hearings

Private equity and hedge funds will be at the heart of three separate congressional hearings to be held Wednesday. Congress will consider raising taxes on investment income and exploring investment risk to individuals and the economy.

If Congress attempts to change established rules, "it's going to damage the economy, it's going to chill investment and risk taking, and it's only going to serve to hurt the individual investor," Nicole Deese, a securities lawyer at Shutts & Bowen, said on "Power Lunch."

By established rules, Deese meant rates of return on investments after taxes.

Richard Ferlauto, director of Pensions & Benefits at AFSCME, said the congressional hearings are necessary, as "we are overleveraged in many places." He cited recent troubles with hedge funds at Amaranth Capital and Bear Stearns as examples.

Hedge fund owners and investors are walking away "multi-millionaires," while being taxed at much lower rates on investment income than the average working person, Ferlauto said.

"That money could be productively invested in the economy to build the human resource capacity that we need to be much more competitive," Ferlauto said.