Monthly Archives: August 2015
Sentiment Building to Deport Nation’s Billionaires
Credit PHOTOGRAPH BY SPENCER PLATT/GETTY
THE HAMPTONS (The Borowitz Report)—They don’t pay taxes. They circumvent our laws. They get free stuff from the government. They are America’s billionaires, and many would like to see them gone.According to a new survey by the University of Minnesota’s Opinion Research Institute, the American people hold the nation’s billionaires in lower esteem than ever before, and a majority would like to see new laws enacted to deport them.
“They come here, take thousands of our jobs, and export them overseas,” one respondent said, in an opinion echoed by many others in the survey.
“They are part of a shadow economy that sucks billions of dollars out of the United States every year and puts it in Switzerland and the Caymans,” another said.
Images of hedge-fund managers arriving via helicopter in the Hamptons this summer have only reinforced the impression that authorities have turned a blind eye to their movements.
“Many of these people should be in prison, and the government is looking the other way,” one respondent said.
Stirring even more controversy is the billionaires’ practice of having babies in the United States and using the nation’s porous estate-tax laws to pass down untold wealth to the next generation.
“They should leave and take their children with them,” one respondent said.
Even after it is pointed out to respondents that some billionaires, such as Warren Buffett and Bill Gates, have made significant philanthropic contributions to the world, a majority of those polled stubbornly maintained their negative views of billionaires.
“Look, in every group you’re going to have some good ones,” one of the respondents said. “But that doesn’t take away from the fact that the vast majority of these people are destroying this country.”
Yves here. This post is a tad on the shrill side, but as you’ll see from the information marshaled, the vitriol is well warranted.
By Lynn Parramore, s contributing editor at AlterNet and senior editor at INET. She is cofounder of Recessionwire, founding editor of New Deal 2.0, and author of “Reading the Sphinx: Ancient Egypt in Nineteenth-Century Literary Culture.” She serves on the editorial board of Lapham’s Quarterly. Follow her on Twitter @LynnParramore. Originally published at Alternet
America’s parasitical oligarchs are masters of public relations. One of their favorite tactics is to masquerade as defenders of the common folk while neatly arranging things behind the scenes so that they can continue to plunder unimpeded. Perhaps nowhere is this sleight of hand displayed so artfully as it is at a particular high-profile charity with the nerve to bill itself as itself as “New York’s largest poverty-fighting organization.”
British novelist Anthony Trollope once wrote, “I have sometimes thought that there is no being so venomous, so bloodthirsty as a professed philanthropist.”
Meet the benevolent patrons of the Robin Hood Foundation.
Robin Hood in Reverse
The Robin Hood Foundation, named for that green-jerkined hero of redistribution who stole from the rich to give to the poor, is run, ironically, by some of the most rapacious capitalists the country has ever produced — men who make robber barons of previous generations look like small-time crooks. Founded by hedge fund mogul Paul Tudor Jones, the foundation boasts 19 billionaires on its leadership boards and committees, the likes of which include this sample of American plutocracy:
-Hedge fund billionaire Steven A. Cohen, who, when he is not being probed for insider trading (his company, SAC Capital Advisors, pled guilty to securities and wire fraud) is busy throwing parties for himself worthy of a Roman emperor at his Hamptons palace and bragging about his $700 million art collection. He suspends a 13-foot shark in formaldehyde from the ceiling his office, perhaps as an avatar of his business practices.
-Billionaire Home Depot founder Ken Langone, who threatened to turn off the charity donations if Pope Francis dared to continue criticizing capitalism and inequality, and also likened the plight of the wealthy in America to Nazi Germany. The GOP megadonor doesn’t care for bank regulation and it’s no surprise that he is the main booster for New Jersey Governor Chris Christie’s presidential bid, as his plan to shred Social Security is a fond wish of the tycoon’s.
– Hedge fund billionaire Stanley Druckenmiller, funder of right-wing causes who dedicates himself to spreading deficit hysteria and ginning up generational warfare on college campuses by trying to convince young people that they are being robbed by seniors using Social Security and Medicare. A long-time anti-tax crusader and supporter of such anti-labor enthusiasts as Wisconsin Governor Scott Walker, Druckenmiller warned President Obama that any attempt to tax the rich to pay for social services for the poor would be futile.
By occupation (the more useless and parasitical the better), it comes as no surprise that 12 of the 19 men in leadership positions at the Robin Hood Foundation happen to be hedge fund managers. A group called Hedge Clippers, supported by a coalition of labor unions and community groups and devoted to exposing how billionaires scheme to inflate their wealth and influence, has pointed out in a scathing report that the Robin Hood Foundation has close ties to an organization called the Managed Funds Association (MFA) that — shocker! —lobbies tirelessly for unjustified tax breaks for hedgies. Paul Tudor Jones’s top deputy, John Torell, chairs the MFA, and 31 members of Robin Hood’s governing board and leadership committees are executives at firms that belong to the highest membership levels of the organization.
The MFA was relatively small until 2007, when Congress started eyeing the “carried interest” tax loophole. Then it brought out the heavy artillery to protect elites from paying their fair share. The carried interest loophole is the MFA’s top priority.
The King of Scams
The carried interest loophole, as economist Dean Baker put it, is likely the worst of all the “sneaky and squirrelly ways that the rich use to escape their tax liability.” It goes down like this: Hedge fund managers brazenly claim they deserve to pay a special low tax rate on the money they earn overseeing the funds they manage because, um, it’s not guaranteed. So they pay 20 percent instead of the 39.6 percent they would pay if the money were taxed as ordinary income. They get very rich from this windfall, just ask Mitt Romney. But you know what? Lots of workers have no guarantee about the money they’ll earn, from people selling cars to the guy who just served you a burger. Do they get a special tax rate? No, they don’t. They pay full freight. In fact, almost nobody’s income is guaranteed. You could get a pay cut tomorrow. Or a pink slip. Do you still pay regular income tax? Yep, you do.
This unfair tax break basically allows hedge fund managers to screw their fellow Americans out of money that could do things the illustrious patrons of the Robin Hood Foundation claim are so dear to their hearts, like building schools and feeding the poor. According to a Congressional Research Service cited in the Hedge Clippers report, closing the carried interest loophole would generate $17 billion a year. How many hungry children in New York City could that feed? All of them.
The loophole makes absolutely no economic or social sense, it’s just a way for the rich to say, hey, we’re powerful enough to lobby for this insanity, so you little people just go ahead and pay for that airport where our private jets are about to land and that road where our Porsches and limos cruise. It’s a middle finger held up to every hard-working person in America. Dirt kicked in the face of the poor.
It’s a driver of inequality and encourages risky speculation on Wall Street. Hillary Clinton, perhaps hoping to ward off the threat of Bernie Sanders, has been making noise about closing the carried interest loophole, which many a politician has made before. Given the cultural focus on inequality and the egregiousness of the policy, it may just be vulnerable. Let’s hope so.
Den of Thieves
The mission statement of the Robin Hood Foundation brays about all the funding it provides for school programs, generating “meaningful results for families in New York’s poorest neighborhoods.” Soup kitchens! Homeless shelters! Job training! The tuxedoed tycoons throw money at all these causes “to give New York’s neediest citizens the tools they need to build better lives.”
How far does this largesse actually go toward ameliorating New York’s poverty problem? Unsurprisingly, not very far at all. In fact, as Hedge Clippers points out, the poverty rate in the city has grown over the course of the Robin Hood Foundation’s history, from 20 percent in 1990 to 21.2 percent in 2012.
Guess what’s also grown? The bank accounts of 19 billionaires on the Robin Hood Foundation’s boards, which have ballooned 93 percent since 2008.
Hedge Clippers applied a delicious tactic to expose the hypocrisy at the heart of the Robin Hood Foundation with stark mathematical precision— they used the organizations own metrics as an analytical tool. The foundation is famed for using grantee evaluations, cost-benefit analyses, and performance measures, including a metrics system freakishly named “relentless monetization.” So the Clippers applied these methods to the foundation’s hedge fund backers themselves, systematically exposing the degree to which they increase inequality and poverty.
How bad it is? A chilling ratio summarizes just how bad— 44:1. That is to say, for every dollar the Robin Hood Foundation hedge fund managers studied give to the organization’s antipoverty efforts, they soak up $44 from the public in the form of tax avoidance and anti-tax advocacy. The authors of the report believe that to be a conservative estimate.
Take the case of Steve Cohen, he of the shark in formaldehyde, and board member emeritus of the Robin Hood Foundation.
The tally of his recent donations to the foundation: $4,850,000.
The estimated amount he ripped off the public in 2014 by paying special low tax rates: $1,300,000,000.
Quite a difference.
When they aren’t advocating tax swindles, members of the Robin Hood Foundation put in plenty of time fighting fair wages, trying to shred the social safety net, and killing worker protections through their associations with organizations like the Manhattan Institute, the Partnership for New York City (the voice of big business in NYC and a big foe of paid sick leave), and Fix the Debt (a notorious group devoted to crushing Social Security and Medicare).
When you think about it, it looks as if the Robin Hood Foundation members are actively trying to strip the public and strangle working people to such a degree that poverty and nickels thrown by billionaires will be all that’s left of America. The rest of us will all be living in Sherwood Forest.
The Robin Hood Foundation’s new motto: Increasing poverty is our business.
Yves here. Let us not kid ourselves that the Democratic party is also for the most part out to gut financial regulation, as exemplified by Democratic party SEC chairman Mary Jo White stalling on Dodd Frank rule-making and regularly granting waivers to sanctions mandated under Dodd Frank. Or how about Janet Yellen, who had a complete deer-in-the-headlights look when Elizabeth Warren challenged her for failing to take on banks that had not delivered living wills, and comes up with lame justifications for Fed subsidies to banks?
The only reason that there is more space between Congressional Republicans and Democrats than usual is the pro-business, pro-bank “blue dog” wing of the Democratic party has gotten deservedly slaughtered in the last two Congressional elections for selling out what used to be the American middle class. So the more progressive-minded survivors are a bigger faction on a relative basis than they once were.
This Real News Network interview with Bill Black covers both a critical slice of the history of financial regulations (or more accurately, its rollback) as well as some of the current dynamics.
JAISAL NOOR, PRODUCER, TRNN: Welcome to the Real News Network. I’m Jaisal Noor in Baltimore. And welcome to this latest edition of the Black Financial Fraud Report.
Now joining us from Bloomington, Minnesota is Bill Black. He’s a former bank regulator and author of The Best Way to Rob a Bank is to Own One. As always, Bill, thanks for joining us.
BILL BLACK, ASSOCIATE PROF. OF ECONOMICS AND LAW, UMKC: Thanks for having me.
NOOR: So Bill, tell us what you have for us this week.
BLACK: Okay. So we have the gift that keeps on giving. This is Phil Graham, former Republican senator from the state of Texas, former chairman of Senate Banking Committee. The lead person in Congress on the repeal of Glass-Steagall through the Gramm-Leach-Bliley Act of 1999 with the active support of President Clinton and such, who the Republicans chose to make their lead featured witness in an attack on financial regulation just a few days ago in which Phil Graham said that the only still-legitimate form of bigotry in the United States as treated by the media was to attack the successful.
PHIL GRAHAM: It goes way beyond paperwork. What all this is about is political demagoguery. It’s the one form of bigotry that is still allowed in America, and that’s bigotry against the successful.
BLACK: And in particular he was outraged on attacks on his friend, the guy stepping down from running AT&T who he said was only going to get something like $68 million. And he considered people like this CEO to be the most exploited people in America, because they added so much value.
NOOR: It sounds like it. Yeah, it sounds like pure exploitation.
BLACK: Yeah. It’s the first word that came to mind when I heard that he got roughly $150 million. I don’t think that could serve him, at his age, through more than about 100,000 times his lifespan that remains.
NOOR: So Bill, talk about more of his comments. We understand that this was an effort to repeal the Dodd-Frank Act.
BLACK: Yeah. It’s part of a general assault. It’s interesting given the Republican primaries as well, that they’re making it so absolutely frontal that they want to A, destroy Dodd-Frank and free up bankers, the exploited class in America. But this is not just the Dodd-Frank repeal. The House is also passing bills that effectively would destroy pretty much all regulation, not just financial regulation.
And so it’s an incredibly broad assault on the entire concept, really, that there should be regulation. That instead that we should go to almost complete laissez-faire system and let bankers and CEOs do pretty much whatever they please without even the pretense of regulation, which is of course what we have now.
NOOR: So we know that with President Obama in the White House for the time being, these proposals have very little chance of advancing and becoming into law. But talk about what would happen if a Republican such as frontrunner Donald Trump would take over when President Obama’s term expires.
BLACK: Oh, well I think enough of us would probably leave the country that that would be the real problem for the United States.
But you don’t need a Trump. And that’s really the point. This is getting, these votes that I’m talking about to destroy Dodd-Frank and to pretty much destroy financial regulation are getting 95 percent support or more among rank and file Republicans in the House and the Senate. So if they had the White House, these things would already be law. And of course on the margins they are chipping away at Dodd-Frank. President Obama agreed to a quote-unquote compromise that already delayed significant important sections of Dodd-Frank, and the Republicans are making it clear that they’re going to use every vote possible on things like the debt ceiling, on things like the transportation bill to demand further weakening of regulation, particularly financial regulation in the United States.
So this isn’t just an issue if the Republicans get control of all three branches of government. It’s a very live issue now.
NOOR: And Bill, I didn’t want to pass up the opportunity to discuss former senator Graham’s history and involvement in repealing things like Glass-Steagal and the Commodity Futures Modernization Act. Give us a little more about his history, and more about–so just to contextualize the fact that it’s this particular person giving this testimony in front of Congress.
BLACK: So Phil Graham is an economist. He was an academic. Very conservative. Came to Washington eager to roll back financial regulation. This is well before Dodd-Frank, of course. Ended up being chairman of Senate Banking. Was incredibly active, as you said, in both of these so-called modernization acts that President Clinton was also heavily supportive of. One got rid of Glass-Steagall, violating the rule that if it ain’t broke, don’t fix it. So Glass-Steagall had worked brilliantly for nearly 50 years before the regulators, particularly Alan Greenspan, turned it into swiss cheese by regulatory exceptions, but that wasn’t good enough for Graham and Clinton. They decided to virtually eliminate the act.
The second one was of course the destroy Brooksley Born law. That’s Commodities Future Modernization Act, which is an oxymoron, that was designed to essentially make it impossible to regulate broad classes of financial derivatives. And that too ended in disaster.
But it isn’t just Phil Graham. It’s also his wife Wendy Graham. Also an economist, also extremely conservative, who ended up as chair of the Commodities Future Trading Commission after Brooksley Born. And so in addition to that act that I talked about, Wendy Graham in her role as chair of the CFTC as Brooksley Born’s actually sort of second successor, passed a special rule that was of enormous benefit to Enron’s fraudulent leaders in producing the California energy crisis. So this further eliminated jurisdiction over another class of trading derivatives that Ken Lay and Skilling used to create the California energy crisis. And of course, Wendy Graham at that point was on the board of directors of Enron. And Phil Graham was taken care of very nicely by a very large bank after his, he retired from the government as well.
So these are, this family, the Graham family, are principal architects. If you want to blame members of the legislature if would be Phil Graham, if you’re going to blame members of the regulatory ranks. It would be Alan Greenspan, of course, first, but Wendy Graham second. And then of course you can add President Clinton to that list, because he was not forced into either of these things. He was a strong proponent of gutting all financial regulation.
NOOR: Well Bill, thanks so much for that report. And of course it makes total sense why former senator Graham would be giving this testimony in front of Congress.
BLACK: It is deliberate symbolism on the part of the Republican party. This–we are the architects of this, and you put us back in power and we plan to go to the max.
NOOR: Well, thanks so much for joining us, Bill.
BLACK: Thank you.
NOOR: Thank you for joining us at the Real News Network.