Do hedge fund managers make more money than they deserve? This article on AlterNet claims that hedge fund manager compensation is egregious, unfair and uncalled for. It starts by likening hedge fund managers to the pharaohs of ancient Egypt and makes a number of value judgments like about how their salaries could be put to better use:

That’s enough to hire 17,143 pediatricians: How is it possible for money managers to be as “valuable” as thousands of doctors who protect the heath of our children and earn on average $175,000 a year?

Or

That’s enough to cover the per person average health care costs of 397,984 Americans. America has the most expensive health care system in the world at a per capita cost of $7,538. Yet one hedge fund manager makes enough to cover the health care costs of nearly four hundred thousand Americans.How can that be?

Factually, the article is correct. Hedge fund managers do make a lot of money and their salaries can be many multiples of the salaries of other people who do provide highly useful services. But what is the point here? Tiger Woods makes a lot more money than the average teacher or firefighter and all he does is hit a little white golf ball around. Why not say that Tiger Woods shouldn’t make the money that he makes and that it should go to providing health care for children.

The point is that yes there are disparities, but trying to legislate them away is not right. What gives one person the moral right to define what is fair for another?

The article goes on to say that:

Hedge funds are exclusive investment funds for the very wealthy and for large institutional investors. It’s for people who believe that they are entitled to earn a much higher return than the rest of us.

And further says that they should be regulated and taxed even more to level the playing field. But doesn’t everyone feel that they are entitled to higher returns than everyone else? Why are there so many mutual funds and online brokerage accounts. Everyone is trying to do better than the next guy. Everyone feels that they are entitled to more. So why not remove the regulations that restrict hedge funds to wealthy investors to give all investors a level playing field. Why try to level the playing field with taxes, which go to a even more inefficient organization (the government) that feels that it has the right to determine what is fair. This organization supposedly serves the people, but often it seems to be controlled by large corporate interests. So where will the money that is taxed away really end up going?

Then the article mentions insider trading:

Hedge funds have been implicated in many insider trader scams. Raj Rajaratnam, the former head of the multi-billion dollar Galleon hedge fund was convicted for amassing more than $70 million of ill-gotten gains. He now is serving a 12 year sentence. More than 50 other hedge fund traders have pleaded guilty.

It is dead right, insider trading is a scourge. But you know that the biggest offender in insider trading is the Senate. Insider trading laws do not apply to them. The article’s solution is that taxes on hedge funds should be increased and given to the thieves within the government so that they can decide what to do with the money. So take money from hedge funds (many of whom operate completely above the board) and giving it to people whom the laws do not even apply and everything will be all better. This is the solution?

The solution:

There’s only one real solution: A financial transaction tax on all stock, bond and derivative trades. Such a financial sales tax would extract about $150 billion a year from Wall Street. Overstuffed hedge fund elites would earn much less.

Yes it will take money from hedge fund managers. But it will also take money from the pension funds of every teacher, doctor, nurse and fire fighter too. Sounds like a great solution to me.