Jon Stewart’s private equity omission

Feb 22, 2012

A serious private equity discussion on America's top comedic newscast.

Late last month I made a short cameo on The Daily Show, as part of a larger segment on Bain Capital.

Being eminently narcissistic, I watched the clip without bothering to watch Jon Stewart’s subsequent Bain-related interview with Yale finance professor Jonathan Macey (who I recently criticized for ignoring dividend recaps in a PE-defending op-ed). But I did get around to it yesterday – the full, unedited version – and wanted to note two things for those who also saw it:

1. Stewart’s over-arching argument was that the broader financial game is rigged, with the wealthy getting the best opportunities to keep getting wealthier. Private equity, he argued, is part of this because only the wealthy can invest in PE funds managed by firms like Bain.

Neither he nor Macey delved into accredited investor requirements (my guess is Stewart would qualify), nor the more salient issue of where the bulk of PE money actually comes from (pensions, endowments, etc.). For example: As much as I despise dividend recaps, the reality is that most of the money pulled out of companies like Dade Industries accrued to LPs whose primary role is to support the 99%. Yes, rich Bain Capital executives also get richer. But the wealth-creation circle is larger than Stewart suggested.

2. Stewart also made a very questionable statement, vis-à-vis carried interest. When discussing Romney’s statement that he paid in taxes what he was legally required, Stewart said that Romney neglected to note that “the company that I founded put millions of dollars into lobbyists to make it that way.”

Call this a quibble, but money Bain has spent lobbying on issues like carry would be to maintain the current tax laws, not to create them in the first place. Methinks it’s an important distinction.

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