Posts
Still wonder why there's less and less funding of education?
That it's all been a BIG mistake?
(Yes, I know this essay is too long, but the information within deserves the length - and so do you!)
Corporations Act To Make Congress A Wholly Owned Subsidiary
October 31, 2014
As Election Day approaches, two reports show exactly how corrupted our political system has become. Unless voters come out in force, it looks like corporate money is about to buy itself another house of Congress.
The Wall Street Journal analyzed filings from the Federal Election Commission and concluded that
In a significant shift, business groups gave more money to Republican candidates than to Democrats in seven of the most ompetitive Senate races in recent months, in some cases taking the unusual step of betting against sitting senators.The Journal found that corporate PACs gave most of their donations to Democrats in the early part of the campaign. That fits with a longstanding pattern: big-business interests shower incumbents with money to encourage special treatment, both during the election year and in the upcoming term.
But giving has shifted dramatically since June. The Journal discovered that Republican candidates received the lion’s share of corporate campaign contributions in the July-to-September time period. The cash-generating power of incumbency had faded – for Democrats.
One reason for the shift, according to sources, is a sense that Democrats are the underdogs. “Wall Street expects return on investment,” a brokerage executive told the Journal. “It makes no sense to contribute to a losing campaign.”
The other reason, of course, is ideologically based. Corporations feel more comfortable abandoning incumbent Democrats than they do turning their backs on more reliably loyal Republicans. Senate Republican Leader Mitch McConnell has been awash in corporate cash this year, for example – thanks to his far-right stance, his chances of reelection, and the position of influence he would hold as Majority Leader if the GOP captures the Senate.
In a related report, Public Citizen analyzed the flow of “dark money” (from groups which don’t have to disclose their donors) and found that the United States Chamber of Commerce, the largest dark-money spender, “is leaving a huge footprint in almost every race it enters.”
As of October 25, the Chamber had spent $31.8 million on House and Senate races. The second-largest dark-money spender, Karl Rove’s Crossroads GPS, had spent $23.5 million. Other big-spending dark-money groups include “Patriot Majority USA,” the extremist “Americans for Prosperity,” and the National Rifle Association.
Public Citizen found that the Chamber was “the biggest spender among non-disclosing outside groups in 28 of 35 races in which it has gotten involved. It is the second-biggest non-disclosing spender in three races, and the third-biggest dark money spender in four races.”
This dark money is being spent in as lopsided a manner as that of the business PACs analyzed by the Wall Street Journal, with Public Citizen concluding that “almost all of the money the Chamber has spent has gone to aid Republicans or hinder Democrats … The Chamber has not spent any money supporting Democrats.”
The Nation’s George Zornick (who we interviewed about the election last week on The Zero Hour) notes that “the Chamber is a 501(c)(6)tax-exempt organization, meaning it doesn’t have to disclose its donors.” Zornick adds that publicly available data reveals that “much of the Chamber’s money has generally come from titans in the oil, banking and agriculture industries, among others.”
In the past, many Congressional Democrats were able to count on the power of incumbency to trump party affiliation or the “liberal” label when it came time to collect corporate cash. But as Republicans have become increasingly shameless in their subservience to business interests – remember “Washington is here to serve the banks”? – corporations may sense that the time is coming when no longer need to compromise with government at all. From the Wall Street Journal:
“It’s increasingly likely we’re going to reestablish a pro-business majority in the Senate,” said Rob Engstrom, national political director of the U.S. Chamber of Commerce, which mostly backs conservative candidates. He said President Barack Obama and other party leaders had made Democratic candidates “vulnerable, so companies aren’t going to write PAC checks to candidates who fundamentally don’t represent their interests.”
Because they have no "public interests?"
Plutocrats Feeling Persecuted
By Paul Krugman
September 26, 2013 996 Comments
Robert Benmosche, the chief executive of the American International Group, said something stupid the other day. And we should be glad, because his comments help highlight an important but rarely discussed cost of extreme income inequality — namely, the rise of a small but powerful group of what can only be called sociopaths.
For those who don’t recall, A.I.G. is a giant insurance company that played a crucial role in creating the global economic crisis, exploiting loopholes in financial regulation to sell vast numbers of debt guarantees that it had no way to honor. Five years ago, U.S. authorities, fearing that A.I.G.’s collapse might destabilize the whole financial system, stepped in with a huge bailout.
But even the policy makers felt ill used — for example, Ben Bernanke, the chairman of the Federal Reserve, later testified that no other episode in the crisis made him so angry.
And it got worse. For a time, A.I.G. was essentially a ward of the federal government, which owned the bulk of its stock, yet it continued paying large executive bonuses. There was, understandably, much public furor.
So here’s what Mr. Benmosche did in an interview with The Wall Street Journal: He compared the uproar over bonuses to lynchings in the Deep South — the real kind, involving murder — and declared that the bonus backlash was “just as bad and just as wrong.”
You may find it incredible that anyone would, even for an instant, consider this comparison appropriate. But there have actually been a series of stories like this.
In 2010, for example, there was a comparable outburst from Stephen Schwarzman, the chairman of the Blackstone Group, one of the world’s largest private-equity firms. Speaking about proposals to close the carried-interest loophole — which allows executives at firms like Blackstone to pay only 15 percent taxes on much of their income — Mr. Schwarzman declared, “It’s a war; it’s like when Hitler invaded Poland in 1939.”
And you know that such publicly reported statements don’t come out of nowhere. Stuff like this is surely what the Masters of the Universe say to each other all the time, to nods of agreement and approval. It’s just that sometimes they forget that they’re not supposed to say such things where the rabble might learn about it.
Also, notice what both men were defending: namely, their privileges. Mr. Schwarzman was outraged at the notion that he might be required to pay taxes just like the little people; Mr. Benmosche was, in effect, declaring that A.I.G. was entitled to public bailouts and that its executives shouldn’t be expected to make any sacrifice in return.
This is important.
Sometimes the wealthy talk as if they were characters in Atlas Shrugged, demanding nothing more from society than that the moochers leave them alone. But these men were speaking for, not against, redistribution — redistribution from the 99 percent to people like them. This isn’t libertarianism; it’s a demand for special treatment. It’s not Ayn Rand; it’s "ancien régime."
Sometimes, in fact, members of the 0.01 percent are explicit about their sense of entitlement.
It was kind of refreshing, in a way, when Charles Munger, the billionaire vice chairman of Berkshire Hathaway, declared that we should “thank God” for the bailout of Wall Street, but that ordinary Americans in financial distress should just “suck it in and cope.”
Incidentally, in another interview — conducted at his seaside villa in Dubrovnik, Croatia — Mr. Benmosche declared that the retirement age should go up to 70 or even 80.
The thing is, by and large, the wealthy have gotten their wish. Wall Street was bailed out, while workers and homeowners weren’t.
Our so-called recovery has done nothing much for ordinary workers, but incomes at the top have soared, with almost all the gains from 2009 to 2012 going to the top 1 percent, and almost a third going to the top 0.01 percent — that is, people with incomes over $10 million.
So why the anger? Why the whining? And bear in mind that claims that the wealthy are being persecuted aren’t just coming from a few loudmouths.
They’ve been all over the op-ed pages and were, in fact, a central theme of the Romney campaign last year.
Well, I have a theory. When you have that much money, what is it you’re trying to buy by making even more? You already have the multiple big houses, the servants, the private jet.
What you really want now is adulation; you want the world to bow before your success. And so the thought that people in the media, in Congress and even in the White House are saying critical things about people like you drives you wild.
It is, of course, incredibly petty. But money brings power, and thanks to surging inequality, these petty people have a lot of money. So their whining, their anger that they don’t receive universal deference, can have real political consequences. Fear the wrath of the .01 percent!
And it gets much worse.
Although it seems impossible.
Hello, Golden Age (for thieves)!
(Although they will tell you that it's legal to steal the public blind.)
Again. (Click on the title to read the whole essay.)
Plutocratic Class Warrior Stephen A. Schwarzman: Public Impoverishment When Such An Individual Gains The Economic and Political Upper Hand?
Friday, October 31, 2014
Stephen A. Schwarzman, head of the Blackstone Group, has already been prominently cited in two columns by Paul Krugman, the Nobel prize-winning economist and New York Times opinion page columnist, as an example of a plutocratic class warrior who believes that the 1% must retain their supremacy over the rest of society, winning at any cost. (See: Plutocrats Feeling Persecuted, September 26, 2013 and Paranoia of the Plutocrats, January 26, 2014.)
Stephen A. Schwarzman sees himself on one side of a class war, where when it come to protecting the preferential tax breaks he receives the rest of us are like Hitler.
Similarly, a recent short piece in the The New Yorker, Moaning Moguls, by James Surowiecki, July 7, 2014, focused in on the way a complaining and financially aloof Schwarzman aligns himself, class-wise, according to a we/they perception of the world:
You wouldn't think [Schwarzman would] have much to complain about. But, to hear him tell it, he's beset by a meddlesome, tax-happy government and a whiny, envious populace. He recently grumbled that the U.S. middle class has taken to "blaming wealthy people" for its problems. Previously, he has said that it might be good to raise income taxes on the poor so they had "skin in the game," and that proposals to repeal the carried-interest tax loophole - from which he personally benefits - were akin to the German invasion of Poland.Is the bottom line that the wealthiest in society like Schwarzman should be living in fear that the political upper hand will be seized by those who will tax the rich (or simply eliminate the loopholes by which Schwarzman pays his income taxes at a preferential lower rate) to dispense “largess to the poor” or other strata of our society? Au contraire! While class warfare is real, (it) is not a matter of what the wealthy might fear from the rest of us, but what the rest of us have to fear in the way of predation from the likes of Schwarzman:
What do individuals such as Schwarzman do when they have the political and the economic upper hand?Schwarzman, who has focused on profiting from buying homes of owners defaulting in the face of economic downturn, has in his role as New York Public Library trustee pushed for the selling and shrinkage of New York City's libraries, he has enthusiastically promoted investment in the environmentally costly practice of hydro-fracking with all its global-warming implications, he has invested in privatizing prisons and now, as is getting attention, we find that he has in a major, very nontransparent way been taking advantage of pension funds, including those of public employees. Some of the pension fund handed over to Schwarzman's Blackstone were set up for the benefit of New York City and New York State employees.
Raiding Pension Funds
In “Wall Street,” the 1987 film famous for its “Greed is good” Gordan Gekko character played by Michael Douglas, a key part of the plot is the disclosure of the unscrupulous lengths to which Gekko will go in dismantling an airline company, putting its employees out of work, in order to raid its pension fund.
The mindset epitomized thereby: An economic framework that works for and benefits a larger segment of society is up for grabs to be destroyed by monied interests playing an insider game to pile up ever greater wealth. That was the 1980s.
Stealing from pension funds? Is it worse when the pension funds that get hit are those of public employees? And if you are a New Yorker paying New York taxes, what if those pension funds are for New York public employees? The politically-connected Stephen Schwarzman who keeps photographs of George W. and Laura Bush and Michael Bloomberg on his office desk has, Gordan Gekko style, been accused of robbing public pension funds, to build up his own personal wealth.
The accusations are worthy of consideration for all they imply. See Zero Hedge’s Leaked Documents Show How Blackstone Fleeces, Taxpayers Via Public Pension Funds, by Tyler Durden, May 5, 2014 passing along an article by David Sirota at Pandodaily, LEAKED: Docs obtained by Pando show how a Wall Street giant is guaranteed huge fees from taxpayers on risky pension investments, May 5, 2014
Here’s some of the Zero Hedge summing up of the situation:
The following story by David Sirota at PandoDaily is simply excellent. It zeros in on the secretive and rapidly expanding relationship between private equity firms and the public pensions that invest in them. It shows a crony capitalist love affair greased by lobbyist influence peddlers known as "placement agents", as well as non-public agreements between PE firms and public pensions chock full of conflicts of interest, extremely high fees and underperformance.
Fees Sapping Fund's Prospects of Investment GrowthUnbelievably, in many instances the trustees of the public pensions are not allowed to know what funds the "fund of funds" invest in. This makes due diligence impossible, and in one particularly egregious example it led the Kentucky Retirement Systems to unknowingly invest in SAC Capital despite the fact it was under SEC investigation at the time.The main point of the PandoDaily article:
Furthermore, with the Wall Street Journal reporting back in 2011 that $37 of every $100 dollars invested in Blackstone's investment pool comes from state and local pension plans, it appears that taxpayers are once again being fleeced by the financial oligarch class.
* * *
The chief villain in this article will be no stranger to readers of this site. It is Blackstone . .
An increasing number of those pension funds are being stealthily diverted into high-fee, high-risk "alternative investments" that deliver spectacular rewards for the Wall Street firms paid to manage them - but not such great returns for pensioners and taxpayers.According to the analysis of the leaked documents obtained:
Taken together, the documents raise serious questions about whether the government employees, trustees and politicians overseeing major public pension funds are shirking their fiduciary responsibilities under the law when they are cementing "alternative" investment deals.
These pension fund investments were not performing well because of the debilitating effect of high fees. Around the beginning of 2008 Blackstone launched its hedge funds; with a “fund of funds” approach where it steered clients’ money into other hedge funds in return for an additional fee.
When the Kentucky Retirement System was looking to invest about $400 million in Blackstone's Alternative Asset Management Fund (BAAM), which is a so-called “fund of hedge funds” the PandoDaily article says the leaked documents showed:
Blackstone was guaranteed whopping fees of 50 basis points plus 10 percent of any overall profits on retirees' money. In addition, the memo estimates 1.62 percent management fees and 19.78% incentive fees to be paid on top of the Blackstone fees to the underlying (and undisclosed) individual hedge fund managers in the "fund of funds."And:
Pension officials made the decision to invest in the fund despite Blackstone then reportedly being under SEC investigation.The Sunday’s New York Times Business Section of a week ago featured, front page, above-the-fold, a comprehensive article that, in just slightly more tempered New York Timesian business lingo, covered much of the same ground, with a few additions, as the Pando and Zero Hedge articles from last May. See: Behind Private Equity’s Curtain, by Gretchen Morgenson, October 18, 2014.
We’ll come back to ways in which that article, illustrated with a photo of New York City Comptroller Scott Stringer and featuring a quote from him, brings the question of these investments closer to home for New York taxpayers.
First, it would be worthwhile to note the way the compounding effect of `fees,’ especially any accumulating proliferation of them, work to seriously gut an intended building up of retirement investments. To say that “fees” are being charged might imply that valuable services are delivered in exchange, but, bottom line, one ought to suspect and fear the opposite. PBS’s Frontline covered this point well in “The Retirement Gamble” (transcript is available).
U.S. citizens have frequently been described as relying on a “three-legged stool” for their retirement, 1.) social security, 2.) presumably secure pensions, and 3.) invested personal savings that can also include 401(k) and IRAs. Frontline covered how there has been a shift away from pensions (that covered 42% of Americans in 1972) largely to 401(k)s, originally “a corporate tax dodge” for high earners that “Nobody ever thought that this was going to apply to the rest of us.”
 |
| From Frontline's “The Retirement Gamble” |
To lay it all out, Frontline correspondent Martin Smith talked with Jack Bogle, the founder of Vanguard, a company that offers some of the lowest-fee products on the market. Bogle succintly offers the advice “that if you want to improve your retirement outcome, make sure to minimize Wall Street's take.” * (Starting at 23:40 on the video - ignore the investment company promo ironically inserted at the very beginning of the PBS video.):
(* If social security is ever privatized as has been proposed, all these considerations will come into play with respect to social security too.)
MARTIN SMITH: Bogle gave me an example. Assume you're invested in a fund that is earning a gross annual return of 7 percent. They charge you a 2 percent annual fee. Over 50 years, the difference between your net of 5 percent - the red line - and what you would have made without fees - the green line - is staggering.
Bogle says you've lost almost two thirds of what you would have had.
JOHN BOGLE: What happens in the fund business i(n) the magic of compound returns is overwhelmed by the tyranny of compounding costs. It's a mathematical fact. There's no getting around it. The fact that we don't look at it - too bad for us.
MARTIN SMITH: [on camera] What I have a hard time understanding is that 2 percent fee that I might pay to an actively managed mutual fund is going to really have a great impact on my future retirement savings.
JOHN BOGLE: Well, you have to rely on somebody to get out a compound interest table and look at the impact over an investment lifetime. Do you really want to invest in a system where you put up 100 percent of the capital, you the mutual fund shareholder, you take 100 percent of the risk and you get 30 percent of the return?
 |
| Again, from Frontline's “The Retirement Gamble”- Results of a 7% return vs. a 5% return |
On the Political Inside - "Pay to Play"
That’s why it’s a problem when Blackstone and firms like it are making campaign contributions to the very same officials making those decisions. You have heard of "pay-to-play"? See: Do campaign contributions help win pension fund deals?, 8/28/2009. Here from that article:
More than two dozen firms that have surfaced in a broad corruption investigation of public pension funds gave at least $1.97 million in campaign contributions to officials with potential influence over the funds' investments, a USA TODAY analysis shows.
The givers included private-equity giants such as the Blackstone Group, the Carlyle Group and the Quadrangle Group, the firm founded by Steven Rattner, who in July resigned as the White House point man for the auto industry rescue.
The contributions are legal, and the firms haven't been accused of wrongdoing related to the giving.
* * *
Officials of the Blackstone Group have similarly contributed to pension fund incumbents and candidates. The firm's chairman is co-founder Stephen Schwarzman, a former Lehman Bros. executive. Co-founder Peter Peterson retired as Blackstone's senior chairman in 2008.
Campaign finance records show Schwarzman; his wife, Christine; and Peterson gave a combined $30,000 to three candidates who ran in 2002 to succeed H. Carl McCall as state comptroller.
Hevesi, the winner, got the most, $21,000. Separately, McCall received $25,000 from Christine Schwarzman for his unsuccessful bid for governor.
Blackstone has received about $1.74 billion in private equity- and real estate-related investments from the New York pension fund since 1993 and has been paid about $20 million in fees, said Whalen, the state comptroller's spokesman.
The firm has not been accused in the New York investigation.See also Crains New York Business: Private equity donations to politicians uncovered - Staffers of firms gave money to officials with power to steer pension funds to range of investment advisors, by Hilary Potkewitz, August 28, 2009.
New York Attorney General Andrew Cuomo has been investigating pay-to-play accusations involving the state's pension plan and various investment funds, including Carlyle, for the past year. In June, the Carlyle Group agreed to pay a $20 million settlement, and change company policy to limit employee political contributions to $300.And see, Final Alternatives Hedge Fund and Private Equity News: Ex-Blackstone Employee Pleads Guilty In N.Y. Kickback Scandal, May 13 2009.
Blackstone has not been accused of anything as a result of Mr. Cuomo's investigations. A Blackstone spokeswoman said that since at least 2006, the company has had a policy prohibiting employees from donating to campaigns for offices with direct oversight of public pension funds. That policy also requires approval from its general counsel for any campaign contributions.
A former employee of a placement agent now owned by the Blackstone Group has pleaded guilty to securities fraud as part of the widening kickback scandal at a New York State pension fund.Putting this again in the context of the debilitating fees already discussed, we come across this article from the New York Post that ran four years ago during the last election for state comptroller. Harry Wilson, the Republican candidate running for office against Democrat Thomas DiNapoli (who won and is now running again) likely knew what he was talking about because he was a former Blackstone principal. See: A Pension to Slash, by Josh Kosman, August 1, 2010.
The former Blackstone Group principal who is the Republican candidate for New York State Comptroller believes the state should consider decreasing its allocation to private equity in its pension funds.The article points out that:
Most PE firms, he said, do not outperform the S&P 500 after fees.
"I'm not a big believer in alternatives," Wilson told The Post. "I don't own a lot of alternatives in my portfolio."
"To outperform the markets is hard and then when you charge large fees on top of that it is really hard."
The state as of March 31 had 9.3 percent of its $133 billion invested in private-equity funds, and another 9 percent in other "alternative investments" like real estate and hedge funds.Idea That Pension Benefits Are Too Generous Anyway Finds Home at Schwarzman's Blackstone
Maybe candidate Wilson had a change of heart after leaving Blackstone but indications are that for those at Blackstone their heart is not in benefitting the pensioners; the job they are being paid enormous fees to do.
Blackstone’s Byron Wien, vice chairman of New York-based Blackstone's advisory group, said retiree benefits were "too generous."
"The retirement benefits for state workers, really not only in New York, California and New Jersey but throughout the country, are very generous, too generous," Wien said in response to a question about U.S. state budget deficits during a Jan. 5 presentation of his forecast, according to a transcript. "We literally can't afford the benefits we have given our retirees in state and local governments and we have to change that."(See: Blackstone Seeks to Appease New York City Pensions After Wien's Comments, by Cristina Alesci and Jason Kelly, May 26, 2010.)
Wein’s remarks sound very much like Goldman Sachs CEO Lloyd Blankfein when he said that the public was going to have to lower its expectations about “entitlements and what people think that they're going to get. Because they're not going to get it.”
It has been suggested that Mr. Blankfein should, like Mr. Schwarzman, be made one of the trustees to whom we entrust the care of our New York City libraries.
What did Stephen Schwarzman say in response to Mr. Byron’s remarks and the objections that consequently arose?
"Byron will play a central and invaluable role in providing direction and guidance,"While Mr. Wien's heart doesn’t seem to be in helping pensioners, he may also lack the talent that would entitle him to take fees to do so. See: Byron Wien's Atrocious "Forecasting" May Have Cost Blackstone Hundreds Of Millions, by Tyler Durden on 01/06/2011.
Another Level of Asset Stripping: Pension-Funded Job Losses Through Blackstone
While politically luring public pension funds into underperforming high-fee investments is one form of public asset stripping, New York’s pensioners may also be chagrined to learn that the funds they had invested with Blackstone entailed another layer of public loss, one that U.S. Senator Charles Schumer was duty bound to complain about when it came to light.
During the Democratic Convention in the 2012 presidential race Bain Capital was excoriated for jobs it was said to have destroyed in corporate takeovers.
Blackstone engages in the same sort of dismantling of jobs and companies so, by investing in Blackstone, New York’ pension funds (two New York State public employee pension funds and four New York City pension funds) were causing jobs to be lost in Fulton, New York.
A Birds Eye Foods factory was ultimately closed by Blackstone's subsidiary after the union’s and Senator Schumer’s fruitless protests. See Bloomberg’s: Pensions Find Private Equity Bites as Blackstone Cuts Job, by William Selway and Martin Z. Braun, February 23, 2012 and the very similar, slightly truncated Pension and Investments: NY pension funds find private equity controversy as Blackstone cuts jobs, by Bloomberg, February 23, 2012.
The new owners, Pinnacle Foods Group LLC, a company held by the private equity firm Blackstone Group LP (BX), [“the world's largest buyout firm”] closed the factory and fired 270 workers. Kimber, 64, got eight weeks severance for her 12 years on the job and lives with her 37-year-old unemployed daughter in the rust-belt town of about 12,000, northwest of Syracuse.
“They just used us. That’s exactly what they did,” Kimber said. “And then they kicked us to the curb.”
* * *
Private equity executives, including Blackstone managing director and Pinnacle Foods director Prakash Melwani, have helped stock Romney's campaign war chests.
Not quite two weeks later, Schwarzman was granted space in the Times to personally respond to the editorial. He was arguing to support the position that Comptroller Liu has taken, that placement agents should be regulated, not banned, a position that would permit Blackstone to continue to ply its trade with New York pension funds as one of the four largest placement agents. See: Another View: In Defense of Placement Agents, By Stephen A. Schwarzman, March 4, 2010.* * *Ironically, Charles Schumer’s wife, Iris Weinshall, has now taken the position of Chief Operating Officer at the New York Public Library, where, because Schwarzman is a trustee there, she, in a sense works for him as one of her bosses.
New York Comptroller Thomas DiNapoli, the sole trustee of New York's $140 billion retirement fund, declined to comment. New York City Comptroller John Liu declined to comment. John Cardillo, a spokesman for New York state's Teachers' Retirement System, declined to comment.
* * *
In January 2010, U.S. Senator Charles Schumer, the New York Democrat, held a press conference with workers in Fulton, saying he would keep pressuring the company until all the jobs were safe. Schumer said he called Stephen Schwarzman, Blackstone's chairman and co-founder, and asked him to spare the factory.
She replaced Chief Operating Officer David Offensend who came to that position from Evercore, LLP another private equity and hedge fund firm that was spun off from Blackstone. The universe of those exercising influence and power is remarkably small. (So small, in fact, that Offensend's wife, Janet, wound up as a key trustee at the Brooklyn Public Library while it implemented plans tracking the NYPL's similarly selling and shrinking Brooklyn's libraries.)
As the articles note, while New York City Comptroller John Liu did not comment on this factory closing, in another situation where another private equity firm was involved in closing a factory in Cleveland over the objections of investing pension funds whose monies were being used, Liu wrote:
New York's pension funds do not wish to be investing in job loss or in a global `race to the bottom.'Fulton’s Republican Mayor Ronald Woodward, gets the concluding word in the article, putting it (in) terms of class:
"What you're doing by doing that - you are systematically eliminating the middle class," he said. "You're going to be rich or you're going to be poor. There's no in between."Placement Agent Fees
Blackstone, and especially Schwarzman, was also openly going after and championing yet another level of fees that would sap pension fund investments, “placement agent fees.”
When I was in government with the state finance agencies we were confronted by firms that, with political introductions, proposed that they should be inserted as a new level of intermediary between the finance agencies and the investments they made, getting yet another set of fee for its `advice’ or `guidance.' Unable to discern any value to the proposal or actual expertise being offered we turned them away.
“Placement Agent Fees,” paid by pension funds generated considerable controversy and a challenge from the SEC.
The New York Times stepped into the fray with a business section editorial criticizing New York City Comptroller John Liu for wanting to ease a ban on placement agents. See: Editorial: Bringing Back the Fixers, by Dealbook, February 22, 2010. The editorial observed:
For years, the easiest way companies could get contracts to manage billions of dollars for the pension funds for either New York City or New York State was to go through the local influence peddler. It was a recipe for big corruption, especially in Albany.
Both the city and state stopped using placement agents last April after two top advisers to Alan Hevesi, the former state comptroller, were charged with corruption and violation of federal securities law relating to their "private" work as placement agents. The two pleaded not guilty and are expected to go on trial soon.
Another four fixers from the Hevesi era have pleaded guilty to securities fraud. And a California manager of a venture capital fund pleaded guilty in December to giving out nearly $1 million in illegal gifts to New York State officials to get contracts with the state pension fund.
State Comptroller Thomas DiNapoli said Thursday that the ban on placement agents is working well in Albany. He said it had made the investment process more transparent and helped new and smaller firms compete.
So, The Times asks, why is Mr. Liu going in the opposite direction?
The four largest placement agents are part of major financial institutions in New York - Credit Suisse, UBS, Lazard and the Blackstone Group - and the professionals are federally registered and the firms themselves are heavily regulated. We do extensive due diligence on any manager we seek to represent (Blackstone's Park Hill Group takes as clients about 5 percent of the managers who come to it).It is probably not to Comptroller Liu’s credit that he aligned with Schwarzman on this issue. The alignment may have also put Liu in an interesting position when, three years later in the spring of 2013, Liu stepped up to oppose the sale and shrinkage of libraries with their attendant questionable real estate deals that Schwarzman was pushing for as a trustee of the NYPL.
We also prepare marketing materials and then take them before the major sources of investment capital - private, state and local pension plans; university and foundation endowments; sovereign wealth funds; etc. - to make the case as to why these managers warrant an investment. Most of these managers could not get a start in business without placement agents.
When he wrote his Times rebuttal Schwarzman was already on record fighting against any bans on placement agents:
The SEC in May 2009 proposed the outright banning of placement agents , which in New York, California, New Mexico and Kentucky, were the conduit for corruption in those states' public pensions. However, the Private Equity industry was able to kill this SEC proposal, I believe by getting the Obama administration to pressure the SEC to water down this ban.
Blackstone's billionaire founder, Stephen Schwarzman, personally sent a letter to the SEC opposing a placement agent ban. (See: Feds indict public pension placement agent, By Chris Tobe, March 20, 2013.)
A Hidden World, Where With a Lack of Transparency Pension Investors Take Hit for Fund Manager Wrongdoing
The recent article in the Sunday New York Times business section about the inappropriateness of pension funds investing in private equity funds focused mostly on the lack of transparency with respect to those funds and how that lack of transparency can conceal conflicts of interest that benefit the fund managers at the expense of the public investors.
Case in point, the quote featured from Comptroller Stringer was his objection to the fact that there had been a legal settlement respecting alleged misconduct of fund managers where the losses incurred with the settlement were passed along to be paid by the public pensioner investors, not the managers.
Given the lack of transparency of the private equity funds the public pensioners were probably in the dark that they are responsible for these costs, because according to the Times:
Their legal obligations are detailed in private equity documents that are confidential and off limits to pensioners and others interested in seeing them.Notwithstanding, Comptroller Stringer said that forcing the pensioners to take the loss: "violates the spirit of the indemnification clause of our contract.”
. . . Are there lines that just shouldn't be crossed when making making money? For instance, even if we believe that virtually, by definition, prisons should never be privatized and subjected to the profit-making motivations of incarcerating more people longer and for lesser infractions,* if prisons are privatized should it be off limits to invest in them?
(* Michael Moore had some ghastly fun with this in his "Capitalism: A Love Story" documentary segment running through unfortunately true facts about private prison operators kicking back money to judges to keep children in prison, the "kids for cash scandal".)Are we too quick to hold NYPL trustee Schwarzman accountable for the debacle that was the sale of the Donnell Library or for the push for even more library sell-offs and shrinkage with the NYPL's Central Library Plan that, although the NYPL did not publicize it, would have involved public expenditures of over half a billion dollars?
Mid-Manhattan and the 34th Street Science, Industry and Business libraries were to be sold while the research stacks of the Central Reference Library holding three million books were to be destroyed.
Is it within bounds to observe that pulling back on resources like libraries helps send more people to prison? According to Neil Gaiman:
I was once in New York, and I listened to a talk about the building of private prisons - a huge growth industry in America. The prison industry needs to plan its future growth - how many cells are they going to need? How many prisoners are there going to be, 15 years from now? And they found they could predict it very easily, using a pretty simple algorithm, based on asking what percentage of 10 and 11-year-olds couldn't read. And certainly couldn't read for pleasure.(See: The Guardian - Why our future depends on libraries, reading and daydreaming, October 15, 2013.)
Mr. Schwarzman is not the only plutocrat who invests in such anti-social, currently money-making activities as hydro-fracking, with all its myriad long-term pollutions, toxins, water usurpation, radioactivity, earthquakes . . When it comes to the ravaging the entire planet for the benefit of a few with the promotion of more fossil fuel use that will significantly bump up the effects of global warming, Schwarzman isn't likely to catch with the Kochs brothers, or even just David.
Brother David lives in the same building as Schwarzman, 740 Park Avenue, now an infamous symbol of wealth, income and political inequality with assists from Alex Gibney's documentary “Park Avenue: Money, Power & the American Dream”* and the book that preceded it, "740 Park: The Story of the World's Richest Apartment Building," by Michael Gross.
(* The film targets New York Senator Charles E. Schumer as "a chief culprit" in protecting the "tax break benefiting hedge-fund moguls" including Schwarzman.)David Koch who, with his brother Charles have also been attacking universal national healthcare, seems to has his name ubiquitously on everything these days despite such other anti-social activities as financing climate science denial.
Why should we then care or consider it inappropriate that Mr. Schwarzman's name should have appeared on the NYPL's 42nd Street Central Reference Library that would have been so ruined by the real estate deal oriented shrinkage plans he supported?
I think the answer is that it isn't just Mr. Schwarzman and his activities we should be objecting to and even though we are not, per se, talking the 1%, (actually the top tenth of 1%, .01% of all Americans) where an increasing imbalance of wealth is piling up, there are multiple other individuals we should be concerned about in that elite and exclusive group . . .
. . . Maybe it can be argued that putting David H. Koch's name on ballet theaters, NOVA Science episodes, hospital centers, or new oil-black public fountains outside the Metropolitan Museum of Art (weren't we better off with the old fountains and plaza?) somehow ameliorates the fact that we are trading in our environment, probably together with the planet's future, by letting Charles and David pursue ever greater wealth in whatever manner they choose.
Maybe it can also be argued that, in this besieged world where the middle class is already being squeezed out of existence with the spoils divided up, pension funds are best off partaking in dismantling the jobs of other workers in their state to curtail losses. (That argument is suspect, however, if these equity funds don't even keep pace with the broader stock market) . . . .
. . . Nevertheless, does it make sense for us as a society to be signing on to losing propositions that shuffle wealth upwards and then content ourselves with these booby prizes as consolation? Unless we are all in abject surrender mode, isn't it time to remove David H. Koch's name from all those public properties to which he has affixed it and remove Stephen A. Schwarzman's name from the NYPL's 42nd Street Central Reference Library?
Thereafter shouldn't we put a halt to the anti-social activities that have financed such ill-advised public honorings whether they be Mr. Koch's, Mr. Schwarzman's or anyone else setting such lamentable examples?
Posted by Noticing New York at 5:22 PM
.JPG)
Don't it make you long for the pre-Reagan days of defined-pension benefits paid for by companies alone? (Granted, the theory went that they extracted these future payments to you out of your current pay . . . but did your/our pay increase when they stopped doing so?)
Dream on.
And are we really such a nation of cowards?
This Nation of Cowards
By William Rivers Pitt
October 31, 2014
Truthout
It is likely that most of us, myself included, will live out our entire lives and die without ever meeting someone who willingly and purposefully volunteers to spend their vacation thousands of miles away, tending to people with diseases that make the talking heads on CNN and Fox want to hide under the bed. Kaci Hickox, a nurse from Maine who graduated from Johns Hopkins, is one such person.
In 2010, Hickox traveled overseas with the organization Doctors Without Borders to treat people suffering from yellow fever, one of several trips she made with that organization. Until last Friday, she was in Sierra Leone for a month, spending her vacation time helping to treat people infected with Ebola, the virus that has been burning through western Africa at an unprecedented rate. Kaci Hickox went to one of the most unstable countries in the world to help fight a deadly disease because someone had to, and so she raised her hand.
On Friday, she came home to a timorous nation of cowards.
That same day, New York Gov. Andrew Cuomo teamed up with New Jersey Gov. Chris Christie to establish a mandatory 21-day quarantine for any health workers returning from West Africa. When she landed at the ironically-named Liberty International Airport in Newark, she informed an immigration official that she had just returned from Sierra Leone, and was immediately hustled into a room. For the next several hours, she was questioned harshly by several people wearing bio-suits without being told exactly what was going on. According to her, nobody seemed to be in charge.
One man whose gun was visible under his bio-suit, in Hickox own words, "barked questions at me as if I was a criminal." After several hours passed, she was brought to University Hospital in Newark in a speeding sirens-blaring, lights-flashing caravan of eight police cars. Upon arrival, she was stuffed into a quarantine tent with scant furniture, a port-o-potty and no shower, and was informed that this would be her home for the next twenty-one days.
Kaci Hickox, in her own words:
I had spent a month watching children die, alone. I had witnessed human tragedy unfold before my eyes. I had tried to help when much of the world has looked on and done nothing.Hickox began raising Hell about her treatment and the violation of her basic rights. The right-wing blogosphere launched itself into action, denouncing her for being a Democrat and dismissing her complaints because she voted for President Obama. Gov. Christie, one of the duo who ordered her mandatory quarantine, stood by his decision because, as he said, it was his job to protect the citizens of New Jersey. His concern for his constituents was evident, given that he was more than a thousand miles away when he defended his quarantine policy, campaigning for Rick Scott in Florida.
At the hospital, I was escorted to a tent that sat outside of the building. The infectious disease and emergency department doctors took my temperature and other vitals and looked puzzled. "Your temperature is 98.6," they said. "You don't have a fever but we were told you had a fever."
After my temperature was recorded as 98.6 on the oral thermometer, the doctor decided to see what the forehead scanner records. It read 101. The doctor felts my neck and looked at the temperature again. "There's no way you have a fever," he said. "Your face is just flushed."
My blood was taken and tested for Ebola. It came back negative.
I sat alone in the isolation tent and thought of many colleagues who will return home to America and face the same ordeal. Will they be made to feel like criminals and prisoners?
On Monday, Christie was forced to retreat, announcing that Kaci Hickox would be "allowed" to serve out the remainder of her mandatory quarantine at home.
"Allowed."
"I didn't reverse my decision," said Gov. Christie later on Monday while still being so deeply concerned for his constituents that he was still campaigning for Gov. Scott in Florida, when pressed on his sudden change of heart. "She hadn't had any symptoms for 24 hours. And she tested negative for Ebola. So there was no reason to keep her. The reason she was put into the hospital in the first place was because she was running a high fever and was symptomatic."
Lies. Hickox had no fever. She was not symptomatic. She remains so. Yet she has been "allowed" to go home from involuntary detention by a politician who clearly doesn't have the facts, but made sure she would be detained, as he campaigns for another politician in the Sunshine State.
New York Gov. Cuomo, the other side of this mandatory quarantine coin, took the time to invite any health worker detained after returning from their heroic work to "read my book" as a way to pass the time. One can understand why he would choose a civil liberties crisis to pitch his deep thoughts: at the time of this publication, Cuomo's book has sold less than a thousand copies. That's not a very impressive sales number for a salesman selling himself as Vice-Presidential material in the run-up to the 2016 election ... and then he, like Christie, backpedaled on his mandatory quarantine plan.
The American Bar Association has weighed in on the legality of the Christie/Cuomo mandatory quarantine program. "States are required to protect civil liberties during public health emergencies," they wrote.
"Quarantine and isolation orders must be conducted in accordance with substantive and procedural due process, and any restrictions of civil liberties should be legal and as minimally restrictive as reasonably possible." Kaci Hickox would seem to agree.
According to Reuters, Hickox intends to file a federal lawsuit on the grounds that her involuntary confinement was a violation of her civil rights.
When she wins that suit, I will raise a toast to her: a woman who volunteered to send herself into peril to assuage the suffering of others, who returned home with no fever and no symptoms, but was quarantined like a bug in a bottle because two craven politicians decided to catch the frantic media-driven wave and show how they were being Tough On Ebola in the War On Ebola, to the detriment of Kaci Hickox and other health workers who have more courage in the moon of their pinkie fingernail than those two governors have in their whole pander-prone bodies.
"The tyrant will always find a pretext for his tyranny," Aesop tells us. These days, the tyrant will justify that tyranny by playing to the fears of the people. Kaci Hickox is but one example of a nation that has entirely surrendered to those fears, both real and imagined, because those fears are a facile way for TV networks to get ratings, and for politicians to get coverage by stoking those fears, which creates more fear, which generates ratings, which makes political careers. Lather rinse repeat.
This is what happens in a nation trained to be fearful by a media and political establishment which profits from that fear. We have seen it with terrorism, and with WMD in Iraq, and Bird Flu, and "They're coming for your guns," and immigration, and now ISIS, and in so many other moments as well.
Now, it is Ebola, which is dangerous to be sure, but not to the point that we explode the Bill of Rights, again. For the record, it seems the CDC would seem to agree.
This is what happens to an ill-informed populace which is not taught to be strong, and fair, and true to the ideals of their founding, but is instead convinced by the very entities tasked to protect and inform them that they are, actually, about to die at the hands of this week's bloviated threat.
This is how a nation of cowards is made.
Mission accomplished.
(William Rivers Pitt is Truthout's senior editor and lead columnist. He is also a New York Times and internationally bestselling author of three books: War on Iraq: What Team Bush Doesn't Want You to Know, The Greatest Sedition Is Silence and House of Ill Repute: Reflections on War, Lies, and America's Ravaged Reputation. His fourth book, The Mass Destruction of Iraq: Why It Is Happening, and Who Is Responsible, co-written with Dahr Jamail, is available now. He lives and works in New Hampshire.)
One more for the road?
And then on to vote!
Moaning Moguls
No comments:
Post a Comment