Power and Money

Steve Schwarzman: Too Rich or Not For Congress?

Steve Schwarzman

Steve Schwarzman's wealth probably makes a lot of people jealous. He is, after all, fabulously rich. And that would be FABULOUSLY, in all caps.

If Blackstone goes public, Schwarzman will become even more fabulously rich, to the tune of $677 million additional dollars, on top of retaining a 23% stake in the firm. And if that doesn't make you jealous, there's that Wall Street Journal profile of Schwarzman this week, (subscription required) which details, among other things, his upper class sensitivity to a butler's squeaky black shoes, and his and his wife's fancy for $400 worth of stone crabs on weekends. But making a lot of money shouldn't make you a target. And that's what appears to be happening in Congress.

At the last private equity hearings, the outrage over private equity's wealth was palpable. I'd be well on my way to paying for a cup of coffee (at Starbucks, too) if I got a dime for every time the phrase "income inequality" was uttered. Andy Stern, the president of the Service Employees International Union, testified that "the concentration of wealth in the hands of the top one percent of Americans" is a problem--- and that was a sentiment many congressmen supported.

Ultimately, if Sens. Baucus and Grassley succeed in passing their bill, it would mean a chilling effect. Private equity and hedge fund firms could opt to remain out of the public eye, in the safe, sometimes secretive, and certainly lower-taxed world of private partnerships. Or, they could decide to list elsewhere in the world, exacerbating the waning competitiveness of U-S stock markets.

Yes, subjecting the Blackstones of the world to a higher tax rate could win Congress some support among its hard-working constituents, most of whom don't (and can't) spend $400 on food, let alone stone crabs. But it may, ultimately, cause more harm than good.

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