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A 'Fat Cat' Strikes Back

Written by By Jonathan Alter, Newsweek   
Sunday, 15 August 2010 12:08
File photo, Stephen Schwarzman in his office, 11/28/04. (photo: Fred R. Conrad/The New York Times)

File photo, Stephen Schwarzman in his office, 11/28/04. (photo: Fred R. Conrad/The New York Times)



resident Obama and the business community have been at odds for months. But in July the chairman and cofounder of the Blackstone Group, one of the world's largest private-equity firms, amped up the rhetoric. Stephen Schwarzman - the leading John McCain supporter in a firm that, in 2008, gave more money to Obama - was addressing board members of a nonprofit organization when he let loose. "It's a war," Schwarzman said of the struggle with the administration over increasing taxes on private-equity firms. "It's like when Hitler invaded Poland in 1939."

Attendees at the board meeting (who provided details on condition that they and the organization not be identified) were shocked. "War? Hitler? Poland? A little over the top for a proposal to make hedge-fund managers pay their fair share in taxes," one attendee says about the comments. Neither Blackstone nor the White House would discuss Schwarzman's statement, which came in the wake of strong, but less stinging, criticism this summer of the administration from the U.S. Chamber of Commerce and the Business Roundtable.

Schwarzman's original beef with Obama grew out of a 2008 campaign promise that "carried interest" - the compensation structure of private-equity-fund managers - would be taxed as ordinary income (35 percent) instead of capital gains (15 percent). Obama and many Democrats have argued that it's unfair for people like Schwarzman, with a net worth of about $8 billion, to pay taxes at a lower rate than their secretaries and chauffeurs. More substantively, the commissions and fees that hedge-fund managers reap (20 percent of their clients' profits) are not, strictly speaking, capital gains because the managers themselves never held the stocks.

The issue grew more complicated this year when Congress made noises about taxing the sale of private partnerships as ordinary income, not capital gains. This aroused the opposition of thousands of real-estate ventures and other businesses far afield from the hedge-fund world. The government's aim was to prevent tax lawyers for the partnerships from using more than a dozen loopholes to keep taxes low, but it had the effect of slowing efforts to confront the carried-interest discrepancy.

Schwarzman is also angry at the president for some of his rhetoric (Obama has talked of "fat-cat bankers") and for not having a prominent former CEO in his cabinet or inner circle - concerns shared widely throughout the business community, including among Democrats. "Steve thinks the president lacks an intuitive feeling for the role of capital markets," says a Wall Street executive who knows Schwarzman. "Obama is from Mars and Steve is from Venus."


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+52 # James Bowen 2010-08-15 11:47
"Oh please Mr. Obama please don't make us pay our fair share of taxes. We just don't know how we will feed our children."
+17 # Guest 2010-08-15 14:56
Cut out the caviar from their diet?
+8 # Guest 2010-08-15 19:00
Quoting James Bowen:
"Oh please Mr. Obama please don't make us pay our fair share of taxes. We just don't know how we will feed our children."

Feed is the wrong word here. Gorge is more like it.
+47 # Guest 2010-08-15 12:18
Mr. Schwarzman doesn't like being lumped even anonymously with "fat-cat bankers." (The president never identified him by name.) So, does this mean he is still capable of embarrassment when his greedy behavior is highlighted in public? What about shame? And now he joins the shameful ignoramuses comparing this administration with the Third Reich. Do you think he is out of control - just a little? Time to ratchet back the wealth and power entrusted in a few greedy, unaccountable hands. More than a little regulatory rigor is required to get this banking system, economy and this country back on course. The lobbyists are next.
+5 # Guest 2010-08-16 10:19
But, but, but.....regulat ions? Didn't the right outlaw regulations years ago when they de-regulated the airline industry, the insurance industry, the oil indu......well, you get the picture.
+47 # Guest 2010-08-15 12:26
"Obama is from Mars and Steve is from Venus."

Wrong. Steve is from Hell. And to complain that an administration in which Summers, Geithner, and Rubin play important controlling roles is lacking in prominent CEO's is ludicrous. No, guys, the man is actually correct, but he neglects to mention that he is the equivalent of Hitler.

Schwarzman and his crew are responsible for the destruction of our society over a period of decades starting with Reagan just the same way that the Nazis destroyed Warsaw and enslaved the Jews. And worst of all is that he knows it.
+1 # racetoinfinity 2010-08-15 23:58
What makes you think he is aware (outside of his narrow selfish greed) enough (smart enough) to know it?
+16 # Guest 2010-08-15 12:56
It's a show, folks; "circus for the masses", to make us feel better. The uber rich are losing Nothing so far, under Obama. If anything, considering the continuation of the Bush bank bailout, the health care give-away to the insurance industry, i'd say the elite are better off today, than when Obama entered office!
+16 # Guest 2010-08-15 14:59
Nor did they lose anything under Bush or Reagan.
+21 # Guest 2010-08-15 13:06
Schwarzman can run his hedge fund from some other part of the world. The U.S. Chamber of Commerce can easily operate from India or the Cayman Islands. These and others are preempting financial re-regulation. Best for the Obama administration, having preempted the preemption, to go ahead with policy change until the American people catch up to the fraud that has been perpetrated against them. Then, it will be politically possible to devise a more economically sound and fair set of financial regulations. If Schwarzman now makes $50 million annually, he will probably work nearly as hard at his job making only $10 million. Thus, we could have additional tax revenue to pay some of the costs of his having been able to make $50 million in the past and to only make $10 million in the future. He has enough to maintain his obscenity, and I have enough to live on and Mozart.
+19 # Guest 2010-08-15 14:34
This article should be named Hitleresque Fat Cats Strike Out at Liberal Job Market, because the Hitleresque Fat Cat Capitalists are hoarding TRILLIONS OF DOLLARS of capital surplus to prevent the U.S. Economy from recovering by keeping jobs from being developed in the United States by saying it is because of a lack of "investor confidence", as was brought out today on ABC's "This Week with Christiane Amanpour".

Private Capital and Privatized Capitalism is holding the United States as a nation hostage, because Private Capital has monopoly control of the U.S. Economy by way of trillions of dollars of Private Capital and Privatized Capitalism that is absent competition from Social Capital and Socialized Capitalism that functions to balance the interests of the Private GREED of Private Capital and Privatized Capitalism with Social Benefit from Social Capital and Socialized Capitalism.
+10 # Guest 2010-08-15 14:46
Class warfare, anyone?
+23 # Guest 2010-08-15 15:12
Schwarzman, like many in high positions in gov't and business, is a Socially Adept Psychopath. They are more of a threat than terrorists and should be treated as such.
+4 # Guest 2010-08-15 15:56
You Rob are wrong. Lets see how you fair under the Republican Party of NO NO!!!
0 # Guest 2010-08-19 00:51
Quoting wanda landreth:
You Rob are wrong. Lets see how you fair under the Republican Party of NO NO!!!

Agree with you Wanda, but you need to spell it "fare", not "fair", to make your point stick.
+19 # Guest 2010-08-15 16:14
Schwarzman's remark is despicable, uncalled for, crude and totally absurd.

Obama and the administration should come down on him hard in addition to changing the tax loophole for private partnerships to ordinary income. Steve Schwarzman represents the worst of these ingrate Private Equity Funds.

His obscene comments are those of a guttersnipe. He is the mirror image of the ugly American.
+10 # Guest 2010-08-15 16:23
Private equity firms are nothing more than pump and dump operations that buy up companies on the cheap. They then leverage them to maximum, taking the money and then leaving the company to cut employees and/or outsource everything to try to survive.

In the end the company is either sold (if possible) or ends up in bankruptcy. Either way, the private capital firm has returned multiple times their initial investment.
+14 # Guest 2010-08-15 16:48
I do believe Mr. Schwartzman must have invented hyperbole! His ilk very nearly brought DOWN our economy, and ordinary middle class Americans have been made homeless by these banksters, or lost half of the equity if they still have their home; our 401Ks were ravaged by their deceit and gaming on Wall St., millions of jobs disappeared and this worm is crabbing about maybe finally paying fair taxes on his millions? He and the pathetic Chamber of Commerce propagandists can go straight to hell! The wealthy are wealthier than ever, per the daily news. Those are crocodile tears, Mr. Moneybags; relocate to a nice third-world country and try working for a living instead of playing your private equity game here--we are onto your tricks! The Bush era of shifting the tax burden from your elite income set to hard-working middle-class workers is OVER! And the tide is flowing back where it belongs--to progressive tax tables. Tough noogies, buddy!
+3 # Guest 2010-08-16 15:00
Would that you were right, Janis! But I don't believe for a minute that the theft from the middle class is over. The tide isn't flowing anywhere near the progressive tax tables at present----that 's only a gleam in a few Congress critters' eyes.
+11 # Guest 2010-08-15 17:20
Seriously, how has Obama harmed the super wealthy in any way? Democrats are dreaming that his is a party of rational financial reform. The same guys are in power now who have been for twenty years. The Hitleresque take-over occurred in the nineteen eighties.

The little mustache belongs on the Gipper... all since him have held the ship steady for the Golden One Percent.
+16 # Guest 2010-08-15 17:27
This is the natural outgrowth of where Reaganism has led us. Rights, whether deserved or undeserved, are notoriously difficult to take away once they've been "enjoyed" for a period of time. The wealthy have made off like bandits for three decades whilst stagnation, job loss, and financial malfeasance have been the order of the day. If there were any justice in this world, or, presumably, the next, Schwarzman would be required to perform some EXTREMELY difficult manual labor at, how shall I say it, "modest wages." To people like Schwarzman, "infamy is nothing when one has wealth."
+8 # Guest 2010-08-15 17:28
These are men and women who live by the mantra "More than enough is a good place to start" and are often Ayn Randian republicans though many dems are now onboard for the gorging at America and especially our childrens expense.
+13 # Guest 2010-08-15 18:47
And don't forget "fat cats" Whitman in California and McMahon in Connecticut out to buy elections. Whitman never even voted in an election and now she is so interested in politics she would spend her own fortune to win an office? Want to "get" a fat cat? Vote for Jerry Brown and Whitman will have spent more than $100 million dollars for Nothing! Vote for McMahon's opponent and she will waste whatever she has spent. Go get 'em. Yes we can fight back.
+2 # Guest 2010-08-15 19:01
I can't wait 'till Schwarzman rolls out his tank brigade, Wall St. infantry and private drones to do battle with Obama. The way OB has kissed the butts of every other corporate magnet, they deserve each others ruthlessness and condemnation!
+5 # Guest 2010-08-15 19:23
Put the criminal behind bars where he belongs. I'm sure we could find an impartial jury of workers who lost their jobs and livelihood because of his like shenanigans.
+9 # Guest 2010-08-15 19:23
Schwarzman should pay MORE tax not less, since he and other rich people have benefited more from the system and use more of the system's infrastructure than others. These greedy idiots should have the decency to shut their pie holes and enjoy their privileged status, which in the majority of cases they have not even earned.
+9 # Guest 2010-08-15 19:51
So, Mr. Schwarzman is worth only 8 billion dollars and pays less in taxes than some of his employees. How disgusting is that. The more some people have, the more they want and are willing to step on anybody who gets in their way. I would be interested in knowing how much of that 8 billion he donates to charities and which charities they are, if they do exist.
+4 # Guest 2010-08-15 20:34
I, for one, a former victim of Hitler between 1933 and 1937 in Germany, and a U.S. soldier in the Pacific until the end of WW II, including Occupation duty in Japan, will not descend to dignify this shameful, despicable metaphor with a suitable comment. I will only go so far as to warn one and all to beware of what is apparently "coming down the pike" towards us. Be on guard, please. Big trouble may be heading our way !
+2 # Guest 2010-08-15 22:09
Schwarzman lashes out to distract from the real HITLER--himself ! Stupid policies have ruined this country and we need to get rid of those who continue to support these policies--Repub licans and Democrats. Obama can't do it ALL. Intelligent Citizens must DEMAND justice and change!
+3 # Guest 2010-08-16 01:15
Yes, Schwarzman is disgusting, and so is the chamber of commerce. All these fatcats are raising MILLIONS to defeat Obama and democrats in November.

I know and understand so many of us are angry and disillusioned; but if we and the independents don't get out and vote, the wheels will not come to a grinding halt. WE WILL BE GOING BACKWARDS. THE REPUBLICANS WILL TAKE POWER AND MAKE SURE THAT NOTHING IS ACCOMPLISHED.

They will have subpoena power, and congressman Issa, Ca. is getting ready to launch a host of investigations. That will dwarf what republicans did to Clinton. (Issa is the fool who thought that his millions would buy him the governorship in California, before Schwarzenegger snapped it up)
0 # fhunter 2010-08-16 06:04
Schwarzman phenomenal idiot
+4 # Guest 2010-08-16 07:53
If the 1% want a war, lets give them a war. Bring on the guillotines.
+3 # Guest 2010-08-16 09:41
What kind of gov't we have is up to the American people. If the majority is apathetic and uninformed, we will get Republicans, because they make the most noise and tell the biggest lies, and Fox News is the channel these ignoramuses watch. It is vital that progressives and independents make a great effort to educate these people, or we will end up with Republicans back in power to finish the job that Bush began. It speaks well of Obama that these arrogant corporate elitists are against him, he must be doing something right.
0 # Guest 2010-08-16 11:08
I think George sums it up perfectly

George Carlin's Words To The World
George Carlin on "The American Dream". The greatest 3 minutes of his career. The PTB are aggressively trying to keep this video off YouTube and Google, so I thought I'd upload it so it can't get deleted as easily. Everyone needs to watch this!
Length:3:12 Look it up on Utube
0 # Guest 2010-08-16 14:35
How can we see it Varda ?
0 # Guest 2010-08-17 11:31
I must disagree with Mr. Alter on one key point: As Obama himself has said, he's from the planet Krypton. As for Schwarzman, he's clearly a denizen of Ur anus.
0 # Guest 2010-08-17 11:37
Hold on everyone! I remember distinctly reading somewhere shortly after he won that O was going to put 'our' money into Blackstone. Hmmmm I thought 'never heard of them though i read a lot about economics, i'll have to remember that name'. Well now i've heard it and i'll just add it to the many statements/thin gs O has done to confuse and deceive, divide to conquer. He's one of them. The one appointed to carry us to the brink to finish the job the elites started in 1954. Has anyone read the Rochefeller Foundations report for the future? They are the ones who have been calling the shots for years doesn't matter Dem or Rep. Don't tell me how important it is to vote. They control the machines. that's something else O hasn't done anything about along with public financing of elections,free healthcare and free eduction for all like other nations that care about their people.
0 # Guest 2010-08-19 12:36
+1 # Guest 2010-08-20 23:52
The economy = the corporate global economy.

Industrialization = corporate usurpation of production and destruction of the independent craftsman.

Economic development = replacement of small businesses and self-sufficient local economies with the corporate system.

Economic freedom = working for the corporations and buying from the corporations.

Growth = increased corporate profits.

Job creation =
1. (Global South) sweatshops, plantations, child labor.
2. (Global North) paper-shufflers .

Mobility of capital and ideas = rootlessness, unaccountabilit y.

Competitive production costs = elimination of environmental, worker safety, & child labor laws.

Free trade = massive oil-burning transportation system that centralizes economic power in the corporations.

Globalization = destruction of all cultures.
0 # Guest 2010-08-21 16:30
What kind of "big trouble: Mr. Rosenbaum? Has anyone read the record of diplomatic correspondence between the Roman Emperor and the business elite in Alexandria that has been published as The ?...? Sounds very similar to what is going on today. Much of the comment is just vitriol. I prefer both Metcalf and Genierae who remind us to "fight back". Progressives can have more influence with Democrats in power than with most Republicans. Most capitalists in a global economy cannot be controlled but can be contained. Vote and educate; a lot of people are very angry.

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