On the Wealth Tax, Wall Street’s Biden Bet, and Lazard’s Challenge

Photo by Getty Images
John Paulson in 2016
William D. Cohan
September 26, 2021

Since I began writing my column for Puck, I’ve been inundated with feedback about Wall Street’s biggest characters and concerns. I’ll be engaging with some of those questions here—in addition to a few observations of my own.


Yesterday, the House Budget Committee approved Biden’s ambitious $3.5 trillion economic plan, sending it to the floor this week. Still, the legislation seems imperiled by all kinds of challenges. Was Biden too ambitious? What’s the Wall Street view?

There are a lot of issues and concerns confronting the Biden administration at the moment: It’s still reeling from the botched withdrawal from Afghanistan. There’s the ongoing crisis on the Mexican border. Let’s face it, sending Haitian refugees, who struggled relentlessly to get to the border, back to Haiti is not a good look, to say nothing of un-American. The deaths from the Delta variant are averaging more than 2,000 a day. Some of our Western European allies—particularly France—are pissed about the submarine deal with Australia and whether or not that continues to inflame our relationship with China. 


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Then there is the ridiculous debt-ceiling cliffhanger and the potential of yet another government shutdown. And, of course, Biden is battling with Congress—primarily Joe Manchin and Kyrsten Sinema—over both the $1.5 trillion infrastructure bill and the $3.5 trillion economic plan. So he’s got a mess of problems, which probably explains why his approval numbers are now below 50 percent for the first time in his presidency.

While these problems are threats to the Biden presidency, I tend to agree with Susan B. Glasser, the New Yorker columnist, who argued this week that the predictions of Biden’s demise are premature. I would add the word “hugely” to Glasser’s analysis. Robert Caro wrote that Lyndon Johnson was the Master of the Senate. It’s a great book title and a great book. But Joe Biden is the true Master of the Senate, having spent 36 years as a U.S. senator and then another eight years, when he was vice president, overseeing the daily proceedings of the upper chamber. My bet is that he’ll get a deal done, although it will probably come down to some last-minute nut cutting.

Wall Street, writ large, cares about all of these things, of course. It is composed of human beings after all, even though that aspect of Wall Street can get overlooked. But the people I’ve been talking to lately on Wall Street seem more focused on the quickly shifting regulatory environment and what it will mean for them. Even though Gary Gensler, the chairman of the Securities and Exchange Commission, was a pre-I.P.O. Goldman Sachs partner, he has made no secret of the fact that he intends to be a stricter disciplinarian than Wall Street has seen in years. Both Lina Khan, the new chair of the Federal Trade Commission, and Merrick Garland, the Attorney General, have expressed a desire to ramp up M&A oversight. Nor does Wall Street love Saule Omarova, Biden’s nominee to run the Office of the Comptroller of the Currency, a powerful banking regulator. Already, the regulatory attention to SPACs has curtailed that bonanza for the time being. Wall Street cares about its fee revenue and the spate of “progressive” regulators that Biden has appointed are the big worry, not the fight over the infrastructure and budget legislation.


John Paulson was recently in the news… but it was over his high-profile divorce rather than a monster trade or maneuver of financial engineering. What’s Paulson been up to since his infamously successful bet against the U.S. housing market more than a decade ago?

Well, you won’t be surprised to learn that John doesn’t share with me what he’s been doing these days. He rarely talks to the media. If Page Six is right, the 65-year-old Paulson seems to be dating a 33-year-old Instagram diet guru. That seems very billionaire-appropriate doesn’t it? 


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Paulson made some $4 billion personally from his clever bet to short the mortgage market in the years leading up to the 2008 financial crisis. So who needs more than that? I think it’s safe to say Paulson is a bit of a one-hit wonder, though. In July 2020, Paulson announced that he was returning the capital in his hedge fund—which at its peak managed about $36 billion—back to his investors and he would just manage his own money. Forbes lists his net worth at around $4 billion still, so he’ll be just fine, as will his soon-to-be ex-wife, Jenny, although who knows what their financial arrangement will be. There’s plenty of real-estate to fight over, including a townhouse at 4 East 86th Street, in Manhattan, a 15,000-square-foot home in Southampton, on Long Island, and he spent $49 million for a massive ranch in Aspen, Colorado, which includes a 56,000-square foot house. 

Paulson has often advised people to buy real estate, claiming it is the single best investment someone can make. I remember attending a lunch at the University Club, on Fifth Avenue, where Paulson was speaking. It was in 2009, a few months after the most acute phase of the 2008 financial crisis. The place was packed. Paulson was the hottest ticket in town. The huge dining hall in the club was overflowing, so much so that a second lunchroom had to be opened and his talk piped in there. Paulson shared how he had loaded up on Bank of America stock and on gold, neither of which performed particularly well after he bought them. Then he started talking about the depressed housing market and—thanks to the Federal Reserve—the relatively low cost of borrowing, assuming you could get a mortgage. “If you own one home, buy another,” I remember Paulson saying. “If you own two homes, buy a third.” His message was clear: the combination of low-interest rates and the shattered market for homes made the years after the worst part of the financial crisis the best time to buy a home, or more than one. Say what you will about John Paulson and his career, and his divorce, he was absolutely right about that.


The president is now expressing support for a proposal to tax unrealized capital gains, a plan that is divisive even among Democrats. Are your friends on Wall Street concerned? Or is the conventional wisdom that this latest attempt to raise revenue will, like the carried interest loophole, die a quiet death at the hands of industry lobbyists?

Never going to happen. This is just more political theater, a way for Biden to keep his left flank in check. 

There are many reasons it’s not going to happen, chief among them is that it’s un-American to tax someone on their perceived capital gains before they are realized, and, as important, this would be nearly impossible to administer. Say for instance, this so-called “wealth tax” were to miraculously pass Congress, which it most definitely will not. How would it work, in practice? 


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Let’s look at Elon Musk, for example. In 2020, his net worth increased $140 billion, on paper. Under the unrealized gains proposal, he would be taxed some percentage of that $140 billion gain. But what would happen if the next year, his net worth goes down by some many billions? Would Musk get a tax rebate from the I.R.S.? Or what if Tesla, the main source of Musk’s extraordinary wealth, goes bankrupt? Will all the wealth taxes that he previously paid get refunded to him? Consider, too, that Musk would likely be forced to liquidate equity in his companies to afford his new tax bill, annually eroding his stakes in Tesla and SpaceX—companies that are valued so highly, in part, because of Musk’s ownership.

The irony of the proposed “wealth tax” is that there does seem to be consensus that the wealthiest Americans should pay more in taxes. Many billionaires themselves agree that should happen. One idea, crazy as it may be, is to shine a brighter light on the wisdom of making voluntary donations to the U.S. Treasury. Gifts to the federal government are tax-deductible—as long as you itemize your deductions, as most billionaires do—so what could be more patriotic than encouraging these kinds of gifts, in the same way that donations to charities and the villainous donor-advised are encouraged? Musk could donate to NASA, and get a tax-deduction! Maybe Warren Buffett can rescind his pledge to the Gates Foundation and earmark his wealth to a specific government program or to reducing the federal debt. Or Congress could raise the prevailing tax rates on the ultra-wealthy, but as we have seen so much of their wealth is unrealized gains, not annual wages.

America’s billionaires are willing and able to pay more of their vast wealth to benefit the country that made them rich and famous. We just need to be smarter about how we go about getting them to do so. Maybe hold Congressional hearings with Bezos, Musk, Gates, Buffett, the Google bros and Zuckerberg and ask them how they would prefer their vast wealth to be taxed?


What’s your take on Independence Advisors, also known as Salomon Sisters, the new all-women, all-minority Wall Street investment bank?

Of course Salomon Sisters is just the nickname for a new firm, Independence Point Advisors, being set up by Anne Clark Wolf, a former Bank of America executive. I think this is a fabulous idea for many reasons. 


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I have always believed that if more women were in positions of real power on Wall Street, the incidence of testosterone-fueled bad behavior would dwindle, as would the incidence of testosterone-fueled financial crises. The new bank would also be one clever way to redress the ongoing and glaring lack of women and BIPOC executives, bankers, and traders on Wall Street. There’s little doubt that Wolf’s firm is likely to be a more collegial place for people to work. (Wait till word gets around and men want to work there… Resist that impulse Anne!) 

The only dissonant note in the plan—if it turns out to be true—is the suggestion that my old firm, Lazard, will be making a minority investment in Independence Point. As I wrote about in chapter 14 (“It’s a White Man’s World”) in my 2007 bestselling book about the firm, The Last Tycoons, Lazard’s track record of hiring and promoting women was always dismal at best. My old investment banking pals at the firm hate when I point this out—the longtime general counsel, Scott Hoffman, once hung up the phone on me after I wrote something he didn’t like on this subject—but Lazard’s track record, (although much improved) in attracting, hiring, and promoting women and minorities remains unimpressive, even by the general unimpressive standards on Wall Street. 

There might be some hope for Lazard, though. Lazard’s glossy 2020 Corporate Sustainability Report lays out the firm’s ambitions on the diversity front: Increasing by 2026 to 45 percent, from 36 percent, the percentage of women who work at Lazard; increasing to 35 percent, from 26 percent, the percentage of women at the vice-president and managing director level; increasing to 50 percent, from 33 percent, the percentage of women recruited as first-year bankers at the firm; increasing to 15 percent, from 12 percent, the percentage of Black and Hispanic employees at the firm; and, increasing to 15 percent, from 4 percent, the percentage of Black and Hispanic campus recruits. 

EFinancialcareers, a Wall Street blog, figured for Lazard to meet its goals for gender equality, fully 84 percent of the 711 people Lazard plans to hire in the next five years need to be women. That’ll be a challenge for sure. But let’s never concede that the mistakes of the past are destined to be repeated in the future. (There would never have been a Corporate Sustainability Report at the old Lazard, that’s for sure.) In any event, the Independence Point investment might be a good way for Lazard to show just how serious it is these days about improving its diversity.

Have a question you’d like answered in the next edition? Email us at fritz@puck.news.

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