Private equity investment would decrease by several billion a year while causing a loss of jobs under a pending carried interest proposal, according to a new study. 

Increasing the tax rate on profits earned by investment fund managers would reduce private equity investment by $7 billion a year, from $34 billion to $27 billion annually, according to a study by the Private Equity Council tracking the connection between tax rates and private equity investment. 

"This data is consistent over two decades and confirms that tax increases reduce private equity investment activity and that the proposed 157 percent tax increase on investment partnerships would have a harmful effect on the economy, the recovery and job creation," PEC President Douglas Lowenstein said in a release Tuesday. "We have said throughout this debate that private equity will continue, but this will have an adverse economic impact."

Senate Finance Chairman Max Baucus (D-Mont.) made some changes Tuesday to the carried interest provisions that would tax as regular income 65 percent of the carried interest paid as compensation to those in private equity investments after 2012. The House version taxes 75 percent as regular income, with a rate as high as 39.6 percent. 

Right now, all carried interest is taxed at 15 percent, the capital gains rate. That rate will increase to 20 percent when the Bush tax cuts expire at the end of this year. 

Completing financial regulatory reform legislation by the end of June is "a goal, not a deadline," Senate Banking Chairman Chris Dodd (D-Conn.) said Tuesday. 

Ideally, the White House would like Congress to be largely finished with a conference report on Wall Street reform by June 24, when President Barack Obama leaves for a meeting of the Group of 20 in Toronto. 

With the economic crisis brewing in Europe, a greater sense of urgency has developed around finishing the bill. 

House Financial Services Chairman Barney Frank (D-Mass.) has said White House Chief of Staff Rahm Emanuel has asked him to produce a consensus report that indicates the direction of the legislation on derivatives and other issues by June 24.

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Sen. Carl Levin (D-Mich.) on Tuesday criticized the Swiss for rejecting a treaty that would have allowed the transfer of the names of U.S. citizens suspected of opening accounts at the Swiss bank UBS to evade U.S. taxes. 

"Rejection of the treaty is an international embarrassment that can be laid at the feet of Swiss legislators who are willing to continue to allow their banks to facilitate U.S. tax evasion," the senator said in prepared remarks. 

Sen. Charles Schumer (D-N.Y.) said final passage of the so-called tax extenders bill would likely come next week.

To help reign in the deficit, Office of Management and Budget Director Peter Orszag on Tuesday said federal agencies will examine under-performing aspects of their departments that no longer help the agency meet its overall goals. 

"We are asking each agency to develop a list of their bottom 5 percent performing discretionary programs, as measured by their impact in furthering the agency's mission," he said, adding, "[As] stewards of the American people's tax dollars, we cannot afford to waste money on programs that do not work, that are out-dated, or that are duplicative of one another." 

Sen. Chuck Grassley (R-Iowa) has asked the Department of Labor to account for how stimulus dollars have been spent on clean-energy jobs when it appears there is no clear definition for this type of work.

"[It] has come to my attention that the DOL is just now attempting to define what a 'green job' is," Grassley wrote in June 2 letter to Labor Secretary Hilda Solis. "Interestingly, this comes more than a year after the [stimulus bill] was signed into law and after millions of dollars in funding have already been distributed for green jobs."

Grassley opposed the legislation because he thought it was too expensive. The 2009 bill provided $80 billion for such work, but the senator contends the money might have been spent in other areas.

Financial firms that act as wholesale brokers in the multitrillion-dollar derivatives market may benefit from Washington’s effort to overhaul Wall Street.

Congress is in the final stages of approving legislation that aims in part to boost oversight of the largely opaque derivatives market, which has a face value in excess of $600 trillion.

The market operates now largely “over-the-counter” (OTC), meaning between buyers and sellers in private deals that many blame for exacerbating the 2008 financial crisis. As part of the regulatory overhaul, President Barack Obama and Congress want to make the derivatives market more transparent by boosting the role of middlemen in the form of central clearinghouses, electronic exchanges and swap execution facilities.

Senate Finance Chairman Max Baucus (D-Mont.) on Monday said Democratic leaders in his chamber were close to a deal on the so-called tax extenders bill. 

The bill resuscitates several tax breaks that expired last year. It also extends unemployment benefits, which expired last month. 

Finance staffers said the bill would be likely ready by 7:30 this evening, but its introduction could be delayed until tomorrow to give senators time to digest its contents, as it is expected to have changed since it came over from the House right before the Memorial Day recess. 

Treasury Secretary Timothy Geithner is slated to appear before the Senate Finance Committee on Thursday to testify on U.S.-China relations. 

The hearing will examine how the Asian country is handling its international obligations as well as currency practices and policies that favor local innovation over foreign competitors.