Legal Commentary

Bashing the capitalist roaders

By Tom Kirkendall

Does it appear to anyone else that Hillary Clinton is getting a bit desperate in attempting to salvage her campaign for the Democratic nomination? Get a load of this:

Sen. Hillary Clinton took a swipe at [investment bankers], suggesting wealthy investment bankers and hedge fund managers on Wall Street aren't doing real 'work.' [. . .]

"We also have to reward work more," Clinton told a small group of Ohio residents today. "and by that, I mean, I have people in New York working on Wall Street as investment managers, as hedge fund executives. Under the tax code, they can pay a lower percentage of their income in taxes on $50 million dollars, than a teacher, or a nurse, or a truck driver in Parma pays on $50,000. That's very discouraging to people." [. . .]

The line about investment fund and hedge fund managers has been introduced into Clinton's talking points as she campaigns across the economically struggling state of Ohio.

Investment bankers are certainly an easy target, but Clinton's statement that they don't do "real work" is either disingenuous or appallingly ignorant. Would Clinton say such a thing about other financial intermediaries such as real estate brokers? Investment bankers working on multi-billion dollar mergers are not all that different from real estate brokers -- they are financial intermediaries who get paid a commission for helping to originate and close deals. In short, they are being paid a fee for arranging a transaction between a willing buyer and a willing seller.

And believe me, for anyone who has ever seen investment bankers work a deal, it's definitely hard work. Finding potential buyers and sellers, persuading them to become involved in a transaction, and making the deal happen amidst the myriad of risks that could undermine it is not a cakewalk. Long hours, the ability to deal with rejection, the uncertainty of the fee until the deal closes, grinding travel and pressurized work conditions are just a few of the hardships that investment bankers endure.

Inasmuch as such work is hard, it's not for everybody. Thus, with really good investment bankers in short supply, they can command high compensation. And the good ones are well worth it. Where else will a seller or buyer find someone with a comprehensive list of direct contacts among potential parties to a transaction and extensive experience getting difficult deals closed? A principal to a transaction is simply renting those contacts and experience and, although often expensive, the investment banker is worth every penny if he or she can pull a deal together for the principal.

The foregoing is pretty basic stuff, so it's alarming that a Senator from a state with more investment bankers than any other would engage in demagoguery over them. John Carney over at Dealbreaker sums up the irony quite well:

"Now being the First Lady for eight years and a Senator from a state in which you've never lived, that's real work."

And lest the Obama crowd get too over-confident with Clinton's increasingly bizarre statements, get a load of this performance by Austin lawyer and political operative Kirk Watson, who has endorsed Obama:

Full post as published by Houston's Clear Thinkers on February 21, 2008 (boomark / email).