Uncle Tom’s Hedge Fund

It began with the minority set asides in the affirmative action days and continues today all the way to the glass elevators of high finance. For those not familiar the scheme works like this. In many federal, state, and local contracts there is a certain percentage of the contract that is “set aside” for minority contractors, it allows them to share in the growth of the economy and get their fair share, so the thinking goes. This is supposed to allow smaller minority contractors to expand and become larger contractors and hopefully hire more minorities. On the surface this seems like a noble idea to help increase the participation of minority businesses.

Unfortunately, the greed of some men knows no bounds and they cannot allow even the small percentage of minority set asides to escape their grasp. There are some large white contractors that have created their own minority contractors so they can bid on the minority sections of the contracts. They will find a blackman, usually unemployed or addicted and set them up in business in name only. The blackman will technically be the owner of the business, but has no real say so in the business; many do not even work for their own companies. The white contractor has a figurehead for his “minority business” and can then go after the minority section of the contract as well as the regular contract.

This scheme has now been replicated by the big money hedge fund managers. In an effort to derail new taxation legislation headed their way which in effect would begin to tax their fees not as capital gains (15%), but as regular income (35%) they have advanced the argument that by changing the taxation rate this will hurt minority business owners and inner city investments.

If you’re lobbying to keep a tax break, rich white guys making astronomical sums by investing other people's money aren't the most sympathetic clients -- especially when they're paying taxes at a lower rate than firefighters and teachers. So the private-equity and hedge fund industry has come up with a cynical new approach, arguing that raising their taxes would hurt women- and minority-owned firms and dampen investment in needy urban areas.

Among those providing funding for the new group, called the Access to Capital Coalition, is the Private Equity Council, a trade association formed by 11 larger funds to stifle some pesky lawmakers thinking about ending their cushy tax deal. "The present carried interest policy has been essential to attracting top talented minorities and women to the industry as independent firms and fund managers. Its elimination, consequently, would have the unfortunate effect of impeding this great progress," Willie E. Woods Jr., a founding member of the new group, says in its press release.[1]

These assertions are false. The group Access to Capital Coalition is a group of minority and women money managers who are being funded by the large money managers to put a minority face on the hedge fund business that is overwhelmingly white and male. It is a blatant attempt to try to block pending legislation to begin to tax the income (carried interest) as regular income. It is a shame that these multi-million and sometimes multi-billionaires are being taxed at a lower rate than teachers and they still want a break. By enlisting the aid of these minorities with their contributions they have attempted to buy some sympathy in the Congress. They can now parade this group of “minorities” in front of the committees and make the claim that the new legislation will harm minorities when in fact it will help minorities. The money being taxed is not the return on investments; it is the fees being charged by the managers.

Once again you have Blacks who are willing to sell out other Blacks to make a little money for themselves. The revenue from these fees generated by the hedge funds could go a long way to actually increasing investment in the inner city through block grants and other forms of government renewal funding. It is only now that these large funds are concerned about inner city investments; if they do have a genuine concern let them show it by directly investing in inner city development and projects. It is a shame that these successful Blacks do not want to see other Blacks get the chance to replicate their success.

[1] http://www.washingtonpost.com/wp-dyn/content/article/2007/09/06/AR2007090602265.html?hpid=opinionsbox1