July 17, 2011
Dear Ms. Murphy,
The proposal to exclude the value of one's home from net worth calculation has two main issues.
First, whether or not someone chooses to use part of their net worth to purchase a home or not has little to do with how financial literate they are. Further if someone chooses to carry a loan or pay it off should be irrelevant to their worthiness to invest in a private placement hedge fund and pay performance fees. Arbitrarily penalizing home owners versus renters is not fair and should not be done in this case.
Second, by raising the limit from $1.5M to $2.0M while at the same time excluding the value of one's primary residence would create too big of an effective increase to the net worth limit for home owners all at the same time. Many affluent investors own their home and carry no mortgage. Many affluent investors homes are worth $800,000 or more. So in this case by excluding the value of one's primary home it would raise the net worth requirement by another $800,000 or more for many investors. So effectively the net worth requirement would jump from $1.5M to $2.8M all in one big change. This is a gigantic 86% increase all at one time Certainly with the technology led recession back in 2001 and the great housing led recession we have been stuck in since 2008 the median net worth of the average U.S. household has not jumped 86%. So please don't both raise the limit from $1.5M to $2.0M and the same time and exclude the value of one's primary residence. This is too big of a change too fast.
The Dodd-Frank act does not require the exclusion of one's primary residence from the net worth calculation. Please do not do this.
Finally please keep in mind, by raising the limit too quickly would hurt the very investors and U.S. citizens you are trying to protect. Investors who could previously have had access to hedge fund manager talent will no longer have this option. More choice is good for investors not less. Don't make the divide between the ultra-rich and the middle class even higher by making this change. Please do what is best for investors and continue to allow them to include the value of their home in the net worth calculation.
Thank you for considering my comments in making your important decision.
Alvin Suvil, PhD Economics