Three Reasons to Be Worried About the Blackstone Group -- and Their Friend,
Hillary Clinton
Wednesday, 26 October 2016 00:00 By Branko Marcetic, In These Times | News
Analysis
Stephen Schwarzman, chairman the Blackstone Group outside the New York
Public Library in Manhattan, March 12, 2014. Leaked emails show Clinton's
advisers sought to "develop a real relationship with" the controversial
private equity firm. (Photo: Victor J. Blue / The New York Times)
Buried among the thousands of John Podesta's emails released recently,
you'll find a short, revealing exchange between Hillary Clinton campaign
chair John Podesta and Neera Tanden, president of the Center for American
Progress and Clinton advisor-in-waiting.
"I saw Jon Grey [sic] today," writes Podesta. "We both sang your praises."
"He's a really good guy," she replies. "And given he will take over
Blackstone, one to develop a real relationship with."
Podesta and Tanden were talking about Jonathan Gray, the global head of real
estate and member of the board of directors of the Blackstone Group, a Wall
Street private equity firm that is now the largest single owner of real
estate in the entire world. This wasn't the only appearance Blackstone has
made in the Podesta emails. Another thread from January 2016 shows Clinton
staff trying to arrange a dinner with Gray and the company's Number 2, Tony
James, as well as Tim Geithner and Larry Summers, two former Obama
administration officials widely credited with spearheading Obama's
soft-on-Wall-Street policies.
In fact, despite Tanden's email, Blackstone already has substantial ties to
Clinton and the Democratic Party as a whole. James not only meets regularly
with both Obama and Clinton, but has held two fundraisers for Clinton in the
past year, including one last month where attendees paid from $50,000 to
over $100,000 to rub elbows with the Democratic candidate. Clinton is the
second biggest recipient of Blackstone members' money this cycle, narrowly
behind Marco Rubio, and while the firm consistently gives more to
Republicans, they've donated millions of dollars to Democrats in the past
few years.
The mutual admiration between Clinton and Blackstone executives, and their
attempts to woo each other, should concern anyone eager to see Clinton -- at
this stage, following the implosion of the Trump campaign, the likely winner
of the election -- follow through on a progressive agenda once in office.
Blackstone has a less-than-stellar record of shady business dealings and red
flags.
1) They're in the Slumlord Business
After the housing crash left millions of US homeowners underwater,
Blackstone swooped in and lined its pockets from the misery of ordinary
Americans. As homeownership rates have dipped, Blackstone, through its
subsidiary Invitation Homes, has become the largest owner of single-family
rental homes in the country, buying up tens of thousands of vacant,
foreclosed homes.
As a 2014 In These Times investigation revealed, once these houses were
occupied by tenants, Blackstone operated more as slumlord than landlord.
Across the country, the company left homes in disrepair, shifting the
responsibility of maintenance to tenants and ignoring constant requests to
fix electrical and plumbing problems. One tenant had no less than six
property managers over the course of a single year. In Atlanta, many tenants
have no one to whom they can relay complaints directly, instead forced to
navigate a straight-to-voicemail system.
Blackstone has violated tenants' rights in other ways too. It has hit
tenants with sudden, unreasonably quick evictions, in one case sending a
resident a five-day eviction notice after the company's own online payment
system failed to deduct the tenant's rent for the month. In other cases, it
sent eviction notices before the rent was even due.
Such rapid eviction may be motivated by the desire to sell homes that have
accrued in value.
The company also charges tenants as much as 180 percent of a city's market
rent and is not above raising the rent anywhere around 10 percent or more in
lease reewals.
2) They're Engaged in Shadow Banking
Following the deregulatory free-for-all of the late 90s and early 2000s,
banks engaged in all kinds of risky behavior that ultimately tanked the
global economy. While they were mostly let off with a slap on the wrist and
a few harsh words, policymakers did institute some regulatory changes to
prevent a future catastrophe. One of these was to increase scrutiny of
lending.
This left many banks more reluctant to lend, and in response there's been a
trend toward "shadow banking," or non-banks engaging in lending. According
to a 2015 report by Goldman Sachs, "shadow banks" -- of which Blackstone is
one -- are responsible for 41 percent of all lending, or nearly $5 trillion
worth, while avoiding the same regulatory oversight as traditional banks.
Nor are shadow banks bound by the so-called Volcker Rule, part of the 2010
Dodd-Frank Wall Street reform bill. This bill prohibited banks from pursuing
certain kinds of profit-driven trading, as well as restricting commercial
banks' investments in hedge funds and private equity.
"Shadow banking" represents such a risk that one politician criticized
Bernie Sanders' plan to break up the banks as insufficient because it did
not deal with the problem. That individual? Hillary Clinton.
3) They Want Your Retirement Savings
The United States has one of the highest percentages of pensioners living in
poverty in the world, with 21.5 percent of those aged 65 or older receiving
an income less than half the national median. Blackstone's Tony James'
solution to this problem, however, as he laid out in a January email to John
Podesta, is not to make Social Security better funded, which he suggested
isn't "politically viable" or "implementable."
Rather, James, together with the New School's Professor Teresa Ghilarducci,
collaborated on a retirement savings plan (called, fittingly, "the
Retirement Savings Plan") that would see workers and employers invest 3
percent of an employee's salary each year into "high-yielding and
risk-reducing alternative asset classes like real estate, hedge funds,
managed futures and commodities." Ghilarducci also happens to be one of
Clinton's advisers, and according to the email, Podesta expressed "interest"
in the plan.
There are several things wrong with the scheme, however. Not only do hedge
funds underperform -- the Kentucky Retirement Systems, for instance, invests
in a hedge fund that brought a return of 1 percent over three years,
including a return of negative 8 percent in 2016 -- but they also siphon off
profits in the form of exorbitant fees. For these reasons, pension funds
have been abandoning hedge funds in recent years. As author Jane White
pointed out, real estate and managed future funds aren't particularly
"risk-reducing" either. Not to mention the fact that the James plan would
reduce employee contributions from 5 percent, already one of the lowest in
the world.
Of course, even if such a scheme would hurt pensioners, it might serve to
benefit companies that deal in real estate, hedge funds and managed futures.
A company that is "the world's largest discretionary investor in hedge
funds." A company like Blackstone.
We tackle the important stories. If you want to see more independent
coverage of complex issues, please support Truthout with a tax-deductible
donation!
Originally published at InTheseTimes.com.
BRANKO MARCETIC
Branko Marcetic is a Fall 2015 In These Times editorial intern.
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Three Reasons to Be Worried About the Blackstone Group -- and Their Friend,
Hillary Clinton
Wednesday, 26 October 2016 00:00 By Branko Marcetic, In These Times | News
Analysis
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reference not valid.Error! Hyperlink reference not valid. Error! Hyperlink
reference not valid.
. Stephen Schwarzman, chairman the Blackstone Group outside the New
York Public Library in Manhattan, March 12, 2014. Leaked emails show
Clinton's advisers sought to "develop a real relationship with" the
controversial private equity firm. (Photo: Victor J. Blue / The New York
Times)
. Buried among the thousands of John Podesta's emails released
recently, you'll find a short, revealing exchange between Hillary Clinton
campaign chair John Podesta and Neera Tanden, president of the Center for
American Progress and Clinton advisor-in-waiting.
"I saw Jon Grey [sic] today," writes Podesta. "We both sang your praises."
"He's a really good guy," she replies. "And given he will take over
Blackstone, one to develop a real relationship with."
Podesta and Tanden were talking about Jonathan Gray, the global head of real
estate and member of the board of directors of the Blackstone Group, a Wall
Street private equity firm that is now the largest single owner of real
estate in the entire world. This wasn't the only appearance Blackstone has
made in the Podesta emails. Another thread from January 2016 shows Clinton
staff trying to arrange a dinner with Gray and the company's Number 2, Tony
James, as well as Tim Geithner and Larry Summers, two former Obama
administration officials widely credited with spearheading Obama's
soft-on-Wall-Street policies.
In fact, despite Tanden's email, Blackstone already has substantial ties to
Clinton and the Democratic Party as a whole. James not only meets regularly
with both Obama and Clinton, but has held two fundraisers for Clinton in the
past year, including one last month where attendees paid from $50,000 to
over $100,000 to rub elbows with the Democratic candidate. Clinton is the
second biggest recipient of Blackstone members' money this cycle, narrowly
behind Marco Rubio, and while the firm consistently gives more to
Republicans, they've donated millions of dollars to Democrats in the past
few years.
The mutual admiration between Clinton and Blackstone executives, and their
attempts to woo each other, should concern anyone eager to see Clinton -- at
this stage, following the implosion of the Trump campaign, the likely winner
of the election -- follow through on a progressive agenda once in office.
Blackstone has a less-than-stellar record of shady business dealings and red
flags.
1) They're in the Slumlord Business
After the housing crash left millions of US homeowners underwater,
Blackstone swooped in and lined its pockets from the misery of ordinary
Americans. As homeownership rates have dipped, Blackstone, through its
subsidiary Invitation Homes, has become the largest owner of single-family
rental homes in the country, buying up tens of thousands of vacant,
foreclosed homes.
As a 2014 In These Times investigation revealed, once these houses were
occupied by tenants, Blackstone operated more as slumlord than landlord.
Across the country, the company left homes in disrepair, shifting the
responsibility of maintenance to tenants and ignoring constant requests to
fix electrical and plumbing problems. One tenant had no less than six
property managers over the course of a single year. In Atlanta, many tenants
have no one to whom they can relay complaints directly, instead forced to
navigate a straight-to-voicemail system.
Blackstone has violated tenants' rights in other ways too. It has hit
tenants with sudden, unreasonably quick evictions, in one case sending a
resident a five-day eviction notice after the company's own online payment
system failed to deduct the tenant's rent for the month. In other cases, it
sent eviction notices before the rent was even due.
Such rapid eviction may be motivated by the desire to sell homes that have
accrued in value.
The company also charges tenants as much as 180 percent of a city's market
rent and is not above raising the rent anywhere around 10 percent or more in
lease reewals.
2) They're Engaged in Shadow Banking
Following the deregulatory free-for-all of the late 90s and early 2000s,
banks engaged in all kinds of risky behavior that ultimately tanked the
global economy. While they were mostly let off with a slap on the wrist and
a few harsh words, policymakers did institute some regulatory changes to
prevent a future catastrophe. One of these was to increase scrutiny of
lending.
This left many banks more reluctant to lend, and in response there's been a
trend toward "shadow banking," or non-banks engaging in lending. According
to a 2015 report by Goldman Sachs, "shadow banks" -- of which Blackstone is
one -- are responsible for 41 percent of all lending, or nearly $5 trillion
worth, while avoiding the same regulatory oversight as traditional banks.
Nor are shadow banks bound by the so-called Volcker Rule, part of the 2010
Dodd-Frank Wall Street reform bill. This bill prohibited banks from pursuing
certain kinds of profit-driven trading, as well as restricting commercial
banks' investments in hedge funds and private equity.
"Shadow banking" represents such a risk that one politician criticized
Bernie Sanders' plan to break up the banks as insufficient because it did
not deal with the problem. That individual? Hillary Clinton.
3) They Want Your Retirement Savings
The United States has one of the highest percentages of pensioners living in
poverty in the world, with 21.5 percent of those aged 65 or older receiving
an income less than half the national median. Blackstone's Tony James'
solution to this problem, however, as he laid out in a January email to John
Podesta, is not to make Social Security better funded, which he suggested
isn't "politically viable" or "implementable."
Rather, James, together with the New School's Professor Teresa Ghilarducci,
collaborated on a retirement savings plan (called, fittingly, "the
Retirement Savings Plan") that would see workers and employers invest 3
percent of an employee's salary each year into "high-yielding and
risk-reducing alternative asset classes like real estate, hedge funds,
managed futures and commodities." Ghilarducci also happens to be one of
Clinton's advisers, and according to the email, Podesta expressed "interest"
in the plan.
There are several things wrong with the scheme, however. Not only do hedge
funds underperform -- the Kentucky Retirement Systems, for instance, invests
in a hedge fund that brought a return of 1 percent over three years,
including a return of negative 8 percent in 2016 -- but they also siphon off
profits in the form of exorbitant fees. For these reasons, pension funds
have been abandoning hedge funds in recent years. As author Jane White
pointed out, real estate and managed future funds aren't particularly
"risk-reducing" either. Not to mention the fact that the James plan would
reduce employee contributions from 5 percent, already one of the lowest in
the world.
Of course, even if such a scheme would hurt pensioners, it might serve to
benefit companies that deal in real estate, hedge funds and managed futures.
A company that is "the world's largest discretionary investor in hedge
funds." A company like Blackstone.
We tackle the important stories. If you want to see more independent
coverage of complex issues, please support Truthout with a tax-deductible
donation!
Originally published at InTheseTimes.com.
Branko Marcetic
Branko Marcetic is a Fall 2015 In These Times editorial intern.
Related Stories
Hillary Clinton's Not-So-New, Not-So-Worker-Friendly Economic Plan
By Elizabeth Schulte, Socialist Worker | Op-EdHillary Clinton and the Church
of the Sacred Fed
By Dean Baker, Truthout | Op-EdHillary Eruption
By Jen Sorensen, Truthout | Cartoon
Show Comments
