This week, we speak with Gretchen Morgenson, senior financial reporter for the NBC News investigative unit. A former stockbroker and alumna of the New York Times and Wall Street Journal, she won the Pulitzer Prize in 2002 for her “trenchant and incisive” reporting on finance. She (and coauthor Joshua Rosner) recently published “These Are the Plunderers: How Private Equity Runs―and Wrecks―America.” They also wrote the 2011 bestseller “Reckless Endangerment: How Outsized Ambition, Greed and Corruption Led to Economic Armageddon,” about the mortgage crisis.
She discusses how the four largest private equity firms — Apollo Global Management (APO), The Blackstone Group (BX), The Carlyle Group (CG), and KKR & Co. (KKR) — have grown to have an outsized impact on not just the U.S. economy, but American society as a whole.
Morgenson explains how PE was originally an institutional type of product aimed at Pensions, Foundations, Endowments and other perpetual investment capital, but has recently moved into high-net-worth retail customers. UHNW investors have been so attracted to Private Equity’s diversified asset class and steady returns, especially in an era of zero interest rates.
We discuss the Carried Interest tax loophole, a tax dodge that benefits a few 1000 people in the country but cost U.S. taxpayers 180 billion dollars per decade. It has become impervious to any sort of attack due to the financial largesse of its beneficiaries to the political class. Apologists include Kirsten Sinema and Ted Cruz. Senators Baldwin, Manchin, Brown have repeatedly introduced legislation to close the Carried Interest Tax Loophole but it remains stubbornly in place.
You can stream and download our full conversation, including any podcast extras, on iTunes, Spotify, Stitcher, Google, YouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here.
Be sure to check out our Masters in Business next week with Peter Borish, founding partner at Tudor Investments, where he was Director of Research for 10 years working directly with Paul Tudor Jones. He has also been Chairman and CEO of Computer Trading Corp, and Chief Strategist for quant fund at Quad Group. Borish is also a founding trustee of the Robin Hood Foundation, formed with Paul Tudor Jones in 1988.
Gretchen Morgenson’s authored books
These Are the Plunderers: How Private Equity Runs―and Wrecks―America by Gretchen Morgenson and Joshua Rosner
The Capitalist’s Bible: The Essential Guide to Free Markets–and Why They Matter to You edited by Gretchen Morgenson
Reckless Endangerment by Gretchen Morgenson and Joshua Rosner
Gretchen Morgenson’s favorite books
Genghis Khan and the Making of the Modern World by Jack Weatherford
The Way We Live Now by Anthony Trollope