Wall Street Needs to Retire Cops and Teachers Defense: Street Whispers

NEW YORK ( TheStreet) -- Ever since the 2008 crisis, it has become fashionable for Wall Street multimillionaires to trumpet their "regular guy" status.

When public animus toward AIG ( AIG) reached a fever pitch in March 2009, mid-level executive Jake DeSantis proclaimed in the resignation letter he sent to The New York Times that he was "raised by schoolteachers working multiple jobs in a world of closing steel mills."

Private equity giant Blackstone Group ( BX), never misses an opportunity to remind anyone who will listen that its investors include over half the pension funds in the U.S. On its home page, this heartwarming video tells us that "when private equity succeeds, public schoolteachers in Michigan, police and firefighters in Colorado, nurses in Ohio and college students in North Carolina reap the benefits." Carlyle Group ( CG), another one of the world's largest buyout shops, has a similar video on its home page, with photos of the cops and firefighters its executives are supposedly serving with the utmost dedication.

The latest example of this "regular folks" defense comes from CME Group ( CME) evp and President Terry Duffy, who complained about the prospect of higher taxes on dividends during an interview on CNBC Wednesday.

"They think this is a bunch of wealthy people trading the stock market. They don't realize its teachers' pension funds there's municipal workers all involved in the marketplace all receiving some kind of yield from their investment," Duffy said, adding, "if you're going to take the cost of that and go up significantly maybe less people will be involved in it. It's just not good for the overall economy."

Informed of Duffy's statement, AFLCIO policy director Damon Silvers called it "a bizarre argument for not taxing dividends," since workers pension funds are tax-exempt.

More broadly, Silvers argues financial activities need to be taxed more heavily. He contends preferred tax rates for capital gains and dividends, as well as the "carried interest" loophole that allows money managers to pay just a 15% tax on much of their income are unfair.

"The tax rates for financial profits are substantially lower than the tax rates for work," he says, arguing that "half of the American people have no financial assets at all and the majority of the financial assets of the country are held by the top 5% of the income structure."

He calls tax subsidies for investment "a giant structure for redistributing wealth to those who already have it."

You don't have to agree with Silvers, however, to be tired of hearing Wall Street sharks invoke firemen and schoolteachers when trying to stave off the latest rule or tax proposal they find distasteful. If Wall Street were doing such a great job for worker pensions, we wouldn't have a public pension shortfall of $2-4.6 trillion-- depending upon whose numbers you believe.

U.S. pension fund investments lost 2.7% in 2011, according to a report released last Friday by the Organisation for Economic Co-operation and Development (OECD). As a group, the organization's 34 member countries are still trying to make back the $3.4 trillion in losses they suffered in 2008. Given that lackluster performance, offering another round of free drinks so we can gamble more pension money at the blackjack table may not be the best idea.

-- Written by Dan Freed in New York.

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