Wall Street Worldview: Why Are People Upset?

By William Boardman, Reader Supported News

02 February 16

ulti-billionaire Stephen A. Schwarzman says he’s puzzled by the amount of discontent apparently felt by other Americans these days.  

Steve Schwarzman is a bland-looking, somewhat paunchy, not unattractive, balding man of benign demeanor who will be 69 on Valentine’s Day 2016. He’s worth $12 billion, give or take a few hundred million. He is a poster boy for Wall Street success and self-esteem and cluelessness. He’s the co-founder, chairman, and CEO of the Blackstone Group, one of the world’s largest financial firms, specializing in private equity, hedge funds, and mergers. He’s a Republican, and his life has been going pretty well for him lately, as it has for decades. 

But he freely admits (or pretends to admit) that he doesn’t understand why the rest of America isn’t just as content as he is. On January 21, at the World Economic Forum in Davos, Switzerland, Schwarzman spoke to a gathering of his peers who run the world about his perception of the US presidential election campaign:

“I find the whole thing astonishing and what’s remarkable is the amount of anger whether it’s on the Republican side or the Democratic side…. Bernie Sanders, to me, is almost more stunning than some of what’s going on in the Republican side. How is that happening, why is that happening?” 

One clue to “why is that happening,” a clue Schwarzman presumably noticed last October, was the $39 million fine Schwarzman’s Blackstone Group advisors had to pay for bilking customers. Blackstone entered into a “consent agreement” with the US Securities and Exchange Commission (SEC) finding that “it breached its fiduciary duty” to its customers. The consent agreement, admitting no guilt, is a tactic often used by corporate shysters to cut their losses when caught with their hands in other people’s pockets. Blackstone’s “cooperation” with the SEC was cited as a reason the SEC fined the company only $10 million. Or, as the SEC press release put it:

“Blackstone consented to the entry of the SEC’s order…. Without admitting or denying the findings, Blackstone agreed to cease and desist from further violations, to disgorge $26.2 million of ill-gotten gains plus prejudgment interest of $2.6 million, and to pay a $10 million civil penalty....  The settlement reflects Blackstone’s remedial acts and its voluntary and prompt cooperation with the Division of Enforcement’s investigation.” [Note: with revenue of $7.484 billion, Blackstone’s $10 million fine represents 10/7484th – or .1336% – of its income.]  

Blackstone steals millions, pays fine, no one goes to jail  

Steve Schwarzman is a smart guy. He went to Yale with George Bush, and like Bush he was in the Yale senior society Skull and Bones. Also like Bush, Schwarzman went to Harvard for his MBA. And then he made billions in an industry that has become a largely deregulated financial racket that brought the country to its economic knees in 2008, under President Bush. So Steve Schwarzman is no dummy. But he wants you to believe he’s not smart enough to figure out a system that made him a billionaire while directly and indirectly impoverishing millions. People resent that system, lots of people resent it deeply for the way it’s treated them. Steve Schwarzman is “astonished” by their anger. And he acts as if he expects people to believe in his pose of naiveté, telling a Bloomberg interviewer: 

“What is the vein that is being tapped into across parties, that has made people so unhappy?... That is something you should spend some time on.”

Schwarzman might have gotten a clue when his president at Blackstone Group  (Tony James) hosted a multi-million-dollar fundraiser for Democrat Hillary Clinton at which she denounced corporate crime (wink-wink, nod-nod). Clinton omitted denunciation of Blackstone for its then-recent fine by the SEC, even though the Blackstone victims included public pension systems in California, Florida, and New Jersey (for teachers, firefighters, police, and other government workers). And if that didn’t seem like enough of a source for anger, Schwarzman might have listened to fellow Blackstone billionaire Byron Wien, who was kicking those public sector workers back in 2010:   

“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. And it is very hard to change that.... But I think we have to be more realistic. We literally can't afford the benefits we have given our retirees in state and local governments. Andwe have to change that.” [emphasis added] 

So Blackstone tried stealing from those pension funds, which may not have been Wien’s intent. Either way, when you set about to reduce the retirement income of people who have earned it by contract, why wouldn’t you expect them to get angry? And especially why wouldn’t you expect them to get angry when their pension “problems” stem from the fiscal deceit of politicians you support? Billionaires attack the life savings of $19,000-a-year workers and expect to be loved? Yes, they do. 

Billionaires don’t live in the same world most of us live in 

Five years later in 2015, Wien was as tone deaf to the situation of most Americans as his baffled Blackstone buddy Schwarzman wondering where all the anger comes from. With no trace of empathy, or irony, Wien wrote in early 2015 about the depleted savings of “many” households:  

“Among those who had savings prior to 2008, 57% said they’d used up some or all of their savings in the Great Recession and its aftermath. What’s more, only 39% of respondents reported having a ‘rainy day’ fund adequate to cover three months of expenses and only 48% of respondents said that they could not completely cover a hypothetical emergency expense costing $400 without selling something or borrowing money.

“Of course, for those in the top-10% of wage earners – ‘it’s all good.’” [emphasis in original]

One of the things you don’t hear the Blackstone boys or others like them fretting much about is wealth inequality. At the Davos conference, where Schwarzman was expressing his bewilderment, Oxfam had just released a report that 62 peopleown half of the wealth in the world: 62 people own as much as 3.6 billion people own. The scales of wealth are balanced, 62 and 3.6 billion. But Schwarzman would like you to believe that he doesn’t see that as a possible source of irritation, never mind anger, even though the trend is startling: in 2010 it took 388 people to own half the world’s wealth. Schwarzman took no note of this reality in his interview at Davos. How bad can the world look to a guy who spends $5 million on his own 60th birthday party in February 2007 at the New York Armory on Park Avenue, featuring rock star Rod Stewart (for $1 million) and a gaggle of guests from the Let Them Eat Cake crowd? At the time, in all apparent insincerity, when his net worth was maybe only $7 billion, Schwarzman told the New Yorker, “I don’t feel like a wealthy person.” 

Wealthy people pay the highest tax rates, except when they don’t

One reason Schwarzman may not feel like a wealthy person is because he and others like him are not taxed like wealthy people. Schwarzman, like Mitt Romney before him, has his income taxed at 15%, the second lowest rate in the tax code (poor people pay a 10% tax rate). The 15% rate is mostly for people earning less than $38,000 a year (or $76,000 for a couple). Schwarzman’s income runs into the tens or hundreds of millions of dollars a year, but is is taxed as if it’s less than $38,000. It’s not magic, and it’s not a crime, it’s a dishonest tax code that Congress consistently refuses to make fair. Surprise! 

The tax gimmick here is called “carried interest” and allows Schwarzman, Romney, and the rest of the private equity gang to have their income taxed as if it’s “capital gains,” for which the (also corruptly low) tax rate is 15%. Because the equity fundsters get this tax break, that means in effect that every other tax paying household has to pay another $400 or more a year to subsidize billionaires. Schwarzman is surely smart enough to understand how nurses or truckers or teachers or even most doctors and lawyers might be annoyed at having to pay taxes at a higher rate than a billionaire. But he doesn’t seem to get it.  

In 2010, when there was some talk of closing the carried interest loophole, Steve Schwarzman strongly objected, as if Wall Street was actually being invaded: “It’s a war…. It’s like when Hitler invaded Poland in 1939.” 

In his other public remarks, Schwarzman doesn’t seem to have much interest in war, metaphorical or real. On the record, it seems to be war only when it’s against him more or less personally. He’s smart enough to understand that war can make people angry, but he remains publicly oblivious to politicians who support illegal wars and call for more, to Americans who fight and die in illegal wars that also promote terrorist responses, or to the way America treats its veterans, whether wounded, homeless, or damaged in invisible ways (like the country). 

Three big dangers: economic crisis, international crisis, and Bernie

In a bizarre four-minute video for the Wall Street Journal on January 21, Schwarzman calmly and smoothly explained what he sees as the three broad reasons for the unsteady state of the world, and especially for shaky market conditions:

• First, the economic slowdown in the US and China, although he called reactions to China “overdone.”


• Second, the geo-political situation, which is “concerning … there are too many unusual things happening in the world now.” In a rather random, imprecise blur he mentioned immigration, ISIS, Pakistan, Iran, Korea’s hydrogen bomb, “and there are lots of other issues going on in the world…. It’s happening with such a frequency, it’s actually de-stabilizing and gives the appearance that the world is out of control.”


• Third, unsettled markets, “because Bernie Sanders has become a viable candidate, at least in Iowa and New Hampshire…. He’s really on the far left.” He added that the Republicans don’t seem to have anyone who inspires confidence to handle the job of president. “And really a key to this market collapse is Bernie rising as a viable candidate….”  

There you have it, the three pillars of the Schwarzman world view: the world’s largest economies, geo-political conflict, and Bernie Sanders. Democracy is an unspoken enemy of the established order. Schwarzman doesn’t say here which he would tackle first – economic, international, or Bernie issues – but it’s hard to believe he cares most about war or peace or inequality of any sort. With nothing to say at Davos about war or torture or drone executions or the predatory American military presence in more than 100 countries around the world, Schwarzman suggested that the country is in “some kind of odd protest moment.” He offered, simplistically, that the US needs a president who can bring people together: 

"The question is, what is everyone protesting about? There are a lot of things that I guess you could, but what's needed actually is a cohesive, healing presidency, not one that's lurching either to the right or to the left….” 

Having said that, Schwarzman expressed support for Donald Trump.  

William M. Boardman has over 40 years experience in theatre, radio, TV, print journalism, and non-fiction, including 20 years in the Vermont judiciary. He has received honors from Writers Guild of America, Corporation for Public Broadcasting, Vermont Life magazine, and an Emmy Award nomination from the Academy of Television Arts and Sciences.

Reader Supported News is the Publication of Origin for this work. Permission to republish is freely granted with credit and a link back to Reader Supported News.