Uh, better make those soft-shell crabs

It certainly was a roller coaster week for Stephen Schwarzman and his colleagues at Blackstone Group LP, the…

It certainly was a roller coaster week for Stephen Schwarzman and his colleagues at Blackstone Group LP, the country’s second-largest private-equity firm, with more than $88 billion in assets under management.
As the week began, Mr. Schwarzman, co-founder and chief executive of the New York-based company, was celebrated as “The $7 Billion Man,” reflecting what his stake in Blackstone is likely to be worth following its highly anticipated $40 billion initial public offering late this month.
But during a tax reform conference in Washington last Tuesday, former Treasury Secretary Robert E. Rubin said private-equity and hedge funds should be taxed at the top ordinary income tax rate of 35% instead of the capital gains rate of 15%.
Washington politicians apparently were listening. Two days later, Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, and Sen. Charles E. Grassley, R-Iowa, its ranking minority member, proposed legislation to raise the tax rate on private-equity firms that go public.
“It’s unfair to allow a publicly traded company to act like a corporation but not pay corporate tax, contrary to the intent of the tax code,” Mr. Grassley said.
If the proposed bill becomes law, Blackstone’s valuation could be cut by as much as 20%, according to Wall Street estimates. But the bill has a long way to go, and there is no word whether Mr. Schwarzman will cut back on what The Wall Street Journal reported to be one of his favorite foods: stone crabs that cost up to $400 apiece.

United we stand
Although lawmakers may be squeezing them for more tax revenue, labor unions are learning to work with private-equity funds, The Washington Post reported last week.
Powerful unions, including the Service Employees International Union in Washington, the United Steelworkers of America in Pittsburgh, the United Auto Workers in Detroit and Unite Here, a New York-based union for hotel workers, all are strategizing with private-equity firms to try to work out favorable deals for their members, the New York Post reported.
“We want these investors to make a lot of money,” said David McCall, a negotiator for the steelworkers union.
“We just want them to view these companies as long-term investments, because our workers obviously have long-term investments. It’s their lives,” Mr. McCall said.
“These [private-equity] guys are not anti-union,” said Bruce Raynor, president of Unite Here. “They’re just pro-money.”

Aye, aye, admiral
The San Antonio Spurs, the newly crowned National Basketball Association titleholders, weren’t the only winners to emerge from San Antonio during the championship series with the Cleveland Cavaliers.
Former Spurs star David Robinson plans to start, with Goldman Sachs & Co.a investment banker David Bassichis, a $250 million private-equity fund that focuses on businesses that support inner-city improvement. Although a name hasn’t been picked yet, it likely will include the word “admiral,” Mr. Robinson’s nickname in honor of his Navy background.

Rising up
Financial services literally soon will be rising from the ashes near New York’s Ground Zero.
Doubts about the commercial viability of lower Manhattan were eased last week following JPMorgan Chase & Co.’s decision to build a 42-story, 1.3 million-square-foot office skyscraper right next to the Ground Zero site.
Since the 9/11 terrorist attacks, financial services companies, once clustered around the Wall Street area, have migrated to midtown Manhattan, and the deal to bring a major player back to the area is seen as a victory for New York Gov. Eliot L. Spitzer and the site’s owner, The Port Authority of New York and New Jersey.