WHAT THE GOP SUPPORTS - Risk = Reward? Guess Again: Partners in private-equity firms like Romneys Bain Capital dont risk their own money. They invest other peoples money and take 2 percent of it as their annual fee for managing the money regardless of how successful they are. Private-equity firms get around two-thirds of their total revenues from these fees. They then pocket 20 percent of any upside gains and pay taxes on only 15 percent of what they make a lower rate than that paid by many middle-class Americans because of a LOOPHOLE that treats that income as capital gains instead of commissions like regular people get. Rather than taking any real risks, they get government to subsidize them. Having piled the companies they purchase with debt, private-equity managers then typically pay themselves gigantic special dividends that recoup their original investments. Interest payments on the mountain of debt they create are tax deductible. In effect, government subsidizes them for using debt instead of incurring any real risk with equity. If the companies are subsequently forced into bankruptcy because they cant manage payments on all this debt, they dump their pension obligations on taxpayers when the Pension Benefit Guaranty Corporation, a federal agency, picks up the tab. Its another variation on Wall Streets playbook of maximizing personal gains and minimizing personal risks. If you screw up royally, you can still walk away like royalty. Taxpayers will bail you out. Personal responsibility is completely foreign to the highest echelons of the Street. Citigroups stock fell 44 percent last year, but its CEO, Vikram Pandit, got at least $ 5.45 million on top of a retention bonus of $ 16.7 million. The stock of JPMorgan Chase fell almost 22 percent, but its CEO, Jamie Dimon, was awarded a package worth $ 17 million. The higher you go in corporate America as a whole, the less relationship there is between risk and reward. Reich, Robert B. "Beyond Outrage: What has gone wrong with our economy and our democracy, and how to fix them"