Senator knows where his croissant is buttered

The New York Times headline said it all: “In Opposing Tax Plan, Schumer Supports Wall Street Over Party.” That’s right, when it came to defending a soak-the-rich tax proposal opposed by his well-heeled financial industry constituents, Sen. Charles Schumer, D-N.Y., uber-liberal and scourge of red meat/red state conservatives, melted faster than an ice cream cone in August.
The tax issue in question is a proposal by Sens. Charles Grassley, R-Iowa, and Max Baucus, D-Mont., to tax the fees of partners of hedge funds and private-equity groups that go public at the 35% ordinary income rate instead of the 15% capital gains rate they have enjoyed traditionally.
Mr. Schumer, who has raised more than $1 million from hedge funds and private-equity firms as chairman of the Democratic Senatorial Campaign Committee in Washington, said last week that such a bill might have “unintended consequences” that could lead to a loss of jobs and a tax hike in his home state.
He also charged that the Democratic proposal singles out private-equity and hedge funds without demanding similar tax concessions from partnerships in the oil and gas, and real estate, industries. Smelling a bluff, The New York Times’ editorial page promptly urged the good senator, who is a member of both the finance and banking committees, to “lead an effort to persuade his colleagues that the [Baucus-Grassley] proposals do not go far enough.” Don’t hold your breath.

Ivy losses
There had to be some serious schadenfreude in investing circles last week following the news that Harvard University’sendowment fund lost approximately $350 million last month through an investment in Boston-based Sowood Capital Management LP. Sowood, a hedge fund firm founded by Jeffrey Larson, who managed Cambridge, Mass.-based Harvard’s foreign-stock holdings until 2004, has lost about half its value as a result of bad bond investments. The crocodile tears among competitors undoubtedly are in reaction to the seemingly endless plaudits the endowments of Harvard and New Haven, Conn.-based Yale University receive in the press. Indeed, Cambridge-based Harvard Management Co., which manages the university’s $29 billion endowment, boasts a stellar 15.2% annual return over the past decade, but critics say the Sowood deal underscores the risks of gambling college funds on non-traditional investments.

A happy marriage
Unlike the purging — and resultant turmoil — that follows most corporate mergers, Brookfield, Wis.-based Fiserv Inc. promises full employment and placidity in the wake of its agreement last week to acquire Norcross, Ga.-based CheckFree Corp. for $4.4 billion.
“Let me put any fears or illusions aside. We expect there to be no adverse affects to the financial adviser community,” said Matthew Epstein, Fiserv’s senior vice president of strategic partnerships.
Although perhaps better known for its electronic-bill-payment and banking applications, CheckFree is prominent in the advisory community for its processing and operations services for portfolio management and managed accounts.

Three cheers for volume
Rich or poor, it’s good to have money. And whether traders are storming or fleeing markets, it’s good to be in the business of owning the turnstile. That’s the fortunate position of NYSE Euronext, the parent of the New York Stock Exchange and the Euronext financial exchanges, which last week reported a 164% jump in second-quarter net profit.
Record trading on the NYSE, a 28% volume boost on the company’s stock exchanges in Paris, Amsterdam, Brussels and Lisbon, as well as booming derivatives trading in London, pushed profits to $161 million for the quarter, up from $61 million in the year-earlier period. May the bulls, or bears, keep running.

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