Welcome to Cato Daily Podcast

Daily Podcast. It's Monday June 18th and this is your host and

Estesie Glova. Harold Forroth would like to thank Washington for New York's financial demise.

Writing in the New York Sun, he argues that, I quote,

to understand why London, not New York York was named the greatest financial hub in a report by MasterCard Incorporated

pay a quick visit to Washington and to the capital building to be more precise and quote he is referring to the upcoming initial public

offering from private equity giant Blackstone, the value of which is now

threatened by a new Senate tax bill. Cato Senior Fellow Dan Mitchell gets

into the particulars in this podcast.

Blackstone's IPO may well be the largest private equity offering in history,

yet CEO Stephen Schwartzman is now said to be reconsidering the wisdom of taking the private

company public. Why is he hesitating? Well far be it for me to actually speculate

on what's in his mind but there is some discussion and some concern that politicians and their plans to try

to raise capital gains taxes on the private equity industry may be playing a role.

To give a little background to our listeners.

Currently if you're in a private equity fund and you're the manager of that fund, how do you get

paid?

Well you get paid what's called 2 and 20.

2% of the fund is your underlying income.

But in order to have the proper incentives to make sure that the fund managers are trying to maximize returns for the

investors, the fund managers also get a cut, usually 20% of the capital gains.

In other words, the increase in value of the capital gains, in other words the increase in value of the underlying

...