Blackstone, the giant Wall Street private equity firm, will hold an invitation-only reception before the final night of the Democratic National Convention in Philadelphia. The event, at the swanky Barnes Foundation art museum, includes the usual perks for attendees: free food, drink, and complimentary shuttle buses to the final night of the convention.
What’s unusual is that the host is precisely the kind of “shadow banker” that Hillary Clinton has singled out as needing more regulation in her rhetoric about getting tough on Wall Street.
But Blackstone President and Chief Operating Officer Hamilton “Tony” James doesn’t seem the least bit intimidated.
James has been a stalwart supporter of Barack Obama, holding fundraisers for him at his home, even while other Wall Street titans criticized him — in fact the co-founder of James’s own company, Blackstone CEO Stephen Schwarzman, once likened Obama’s push to increase taxes on private-equity firms to a “war,” saying: “It’s like when Hitler invaded Poland in 1939.”
Last December, James hosted a high-dollar fundraiser for Hillary Clinton that featured Warren Buffett. He’s made six-figure donations to the Center for American Progress, known as Clinton’s White House in exile, and sits on CAP’s Board of Trustees. And he has made no secret of wanting to hold a high-level position in a future Democratic administration, perhaps even treasury secretary.
The head-scratcher here is that James runs a private equity firm, exactly the kind of “shadow bank” that Clinton has derided as a scourge to the financial system. Shadow banks are financial institutions that do bank-like activities (such as lending or investing for clients) but aren’t chartered as banks, existing outside of the traditional regulatory perimeter.
Clinton argued during the primaries with Bernie Sanders that they were more dangerous than the big banks, because of the lack of scrutiny on their risk-taking. That was the linchpin of her argument that Sanders’s plan was too myopic, and that her plan, which sought to crack down on shadow banking and deny it sources of funds, was more comprehensive.
James has not only actively engaged in defending the whole concept of shadow banking, he created the original private equity trade group, formerly known as the Private Equity Council. The group later quietly changed its name to the more innocuous-sounding American Investment Council.
In 2014, James penned a Wall Street Journal op-ed where he called shadow banking an “Orwellian term that can undermine critical thought.” It was the regulated entities, not shadow banks, that were “the source of almost all the systemic risk in the financial crisis,” he wrote. James explicitly sought to steer policymakers away from “regulations that undermine the many thousands of companies and jobs that need market-based financing to survive and grow.”
That term, “market-based financing,” is a Tony James original. He prefers it because it removes the more sinister connotations associated with the shadows. “Private equity sounds bad, but shadow banking is worse,” he told NPR.
Blackstone operates in leveraged buyouts, asset management, and real estate transactions. It is the largest real estate private equity firm in the world, holding over $103 billion in assets. After the housing bubble collapsed, Blackstone bought 43,000 single-family homes over a two-year period, at one point buying more than $100 million worth of homes per week. They converted most of these into rentals, becoming one of the largest landlords in the world.
Renters have sued Blackstone’s real estate unit, Invitation Homes, for renting out homes in shoddy condition. They’ve also been accused of jacking up rents to satisfy investors, charging as high as 180 percent of the market rent value. Nevertheless, Blackstone plans to spin off Invitation Homes with an initial public offering next year.
James’s company also benefits from taking business lines from regulated banks, such as one of the trading businesses of global firm Credit Suisse. Blackstone then runs that company without government interference; assets in the Credit Suisse group have doubled since 2013.
Top photo: Tony James in 2011.
Off topic.
David–I read and loved your book, Chain of Title.
It was so well-written; I read it in one night because I just couldn’t put it down.
I just wanted a happier ending.
But thank you so much for documenting a part of our history that few seem to want to document. (Too sad, perhaps?)
Anyway, you get my Mensch-of-the-year Award for tackling it!
Romney was a bankster. Actual conservatives refused to vote for him and stayed home. Romney lost.
I hope, progressives will see the light and not vote for Bankster candidates.
That it one thing that conservatives and progressives can do together.
Incredible
TOUGH TALK ?.?.? three speeches $375,000.00 or was it $675,000.00….which do you think would be tougher?.?.?
Say “No!” To dy$topia! Vote Green in ’16! Each voter has one voice and one vote. You may not prevent the apocalypse, but you can be a Mensch like Bernie used to be.
As the epitome of the most corrupt element of the establishment, she’ll say anything, but actions speak louder than words. I don’t notice that she made any critique of “trade” agreements intended to sideline the rule of law in corporate and regulatory matters. This gives a lie to the contention a Clinton restoration can do anything positive about global warming. The yankee imperium will then become subject to corporate arbitrators defending the profits of the oil companies. The stench of corruption has been wafting from the Clintons like the dust from the peanuts character pigpen for decades.
Like everything else in the world, Hillary Clinton is complex. I think it’s entirely possible that she can accept money from Wallstreet and corporate lobbyists, while at the same time do some good to dampen the influence of those very same interests on American politics. I think she can be an awful war-hawk, with NeoCon like foreign policy and at the same time be for universal healthcare and tuition free college. When I look at Hillary, I see a pragmatist, someone who’s willing to let the end justify the means. I don’t particularly agree with that approach, and I would certainly wish for a more progressive candidate, but I don’t think that painting her as a cartoon villain will do us any favors either.
Bernie lost, and Jill is not going to the White House this November, that’s just the simple political reality. What we can do is vote for Jill in all the non-swing states, and look for every green party candidate running for senate seats. We can build a more progressive left in American politics without setting the house on fire and handing the election to the two-bit dictator Donald Trump.
Willing to let the end justify the means…that certainly describes the DNC’s approach to sidelining Sanders.
Does pragmatism mean accepting tons of lobbying money? Is it synonymous with cronyism?
Are you sure the money she accepts doesn’t influence her? https://www.youtube.com/watch?v=QRwLlbNAMVI
Or would it mean stepping down when your opponent (Bernie) has much better chances of beating Trump in the general election? http://www.realclearpolitics.com/epolls/2016/president/us/general_election_trump_vs_sanders-5565.html
I see Hillary as someone who wants power and doesn’t want anything to stand in her way. I don’t see her as demonic like some people do, but I see very little to like about her.
No, pragmatism is not synonymous with cronyism and accepting tons of lobbying money. What I’m saying is that I think Hillary can still do so some good to slow down the influence of money in politics. If she can be believed, she will appoint a supreme court justice who wants to overturn Citizens United. That’s an important first step, permitting an effort in congress to make actual and significant campaign finance reform laws, that aren’t just struck down as first amendment violations. If we got nothing else from a Hillary presidency than a sensible SCOTUS justice, that would be enough to warrant a vote for her, but you also get action on climate change, on college tuition, etc.
On the other hand, a Trump presidency will saddle us with a Scalia 2.0, and the court will continue to uphold the rights of corporations over people.
The whole point of my post was that I think we can both get a Hillary presidency, while at the same time voting green party candidates into the senate and giving Jill Stein support in non-swing states. Empower the green party for future elections, and getting some green party senators in congress will do wonders for the progressive agenda. Also, two years from now, put as many of their candidates into the house.
Again, I’m not particularly a fan of Hillary. I wanted Bernie, and now I want Jill, but I am also realistic about what will happen with the Bernie or Bust approach. I think it would reckless and irresponsible to allow a Trump presidency, and I recognize that Hillary can, despite all her faults, do some good and at least pull us in the right direction. She won’t take us all the way, but even a few steps back from a cliff is better than walking off it.
“cartoon villain”
“two-bit dictator”
Hmmmm…
My apologies, I shouldn’t have said that. I don’t need to paint Trump as a cartoon villain, he does that well enough himself, entirely without my help.
https://m.youtube.com/watch?v=yJi3R1C22H8
You mean like this?
That’s a good analysis, not that I don’t agree with Exiled, but exactly what I plan. Just hope that NM will be clearly blue when the time comes to vote for the good Dr.
As long as private entities are allowed to “create” money they will rule the world. As long as you can make more money manipulating/engineering money than you can producing real wealth or providing useful services it will attract the best, most ambitious brains. 99% of people could not even define what money is. The best definition I have seen is that money is like music or mathematics, undefinable. Why a Plumber or a Farmer looks up to a parasitic bankster is way beyond me; you really have to give the rich credit, they are really good at pulling the wool over the eyes of the plebes. We need the best brains working on Climate Change, not the latest financial scam which drains more money from productive enterprise and we need it yesterday if it isn’t already too late.
When it comes to homeownership, a basic indicator of middle class health, the legacy of the Bush & Obama Wall Street bailout is pretty bleak:
http://www.washingtonsblog.com/2016/07/bye-bye-middle-class-the-rate-of-homeownership-in-the-united-states-has-hit-the-lowest-level-ever.html
This has also hit minority families the hardest; the majority of the minority subprime loan holders in 2008 lost their homes to foreclosure and did not recover. Without a radical shift in direction, the situation will just get worse and worse.
Hey Bernie, how do you feel about your Platform submissions now?
And did you get the aqua Pant Suit I sent you from Amazon?
I don’t understand how these things work, but the “Clinton has derided” link contained some unsettling talk about “repurchasing agreements”. Most businesses go bankrupt, so deciding who gets paid and who gets screwed when the bankruptcy happens is the linchpin of capitalism, that separates the lords from the serfs. And this sounds like a big new class of deals where a company can borrow money to make payroll a couple more months … then turn over everything they have to the last banker willing to do business with them, leaving the employees with nothing or next to nothing. Everybody gets a prospectus in the stock market, but the poor fools waiting for that last paycheck or two are operating on a blind and undeserved faith in a system that puts them dead last.
Bankruptcy was allowed in America for the purpose of avoiding debtors prison and probably enslavement. Until recently, it has been a good thing. But wallstreet predators have over the years paid their whores in congress to little by little make bankruptcy by individuals more difficult and more expensive to the point of requesting that bankruptcy not be allowed. Then the wallstreet thieves want to put bankrupt persons in prison for not following a court order albeit to pay a debt but instead they claim court costs.
We are in fact today a society of crocs and gators feeding upon eachother.
Welcome to the new “revolution”. Thanks “Burn”, lovely endorsement !
More “Change We Can Believe In” !
Vote Jill Stein, put Trump in office and force that disaster to make the Dems move anti-establishment leftwards. Otherwise, keep kissing ass to Hillary lesser of 2 evil manipulation. Things do not change without a “shock”.
I agree, Trump would be just the wake-up call we need for the Democratic Party. To me it’s worth the risk of him winning.
Hilary talking tough on shadow banking is kinda like Hilary saying “quit aborting black babies”.
Sh*t isn’t going to happen. Just like she will never come out and say that she hates MARGARET SANGER or genocide.
“the more innocuous-sounding American Investment Council”
If they want people to understand what they do, they should call it the Madoff Investment Council.
This seems interesting. Blackstone just made a rather substantial investment in Patria, a leading Brazilian asset manager that manages billions of dollars of assets in Brazil such as real estate and infrastructure.
“Pátria Investments
On October 1, 2010, we purchased a 40% equity interest in Pátria Investments Limited and Pátria Investimentos Ltda. (collectively, “Pátria”). Pátria is a leading Brazilian alternative asset manager that was founded in 1988. As of December 31, 2015, Pátria’s alternative asset management businesses managed $8.6 billion in assets and include the management of private equity funds ($3.9 billion), real estate funds ($1.1 billion), infrastructure funds ($3.3 billion) and new initiatives ($310 million). Pátria has approximately 230 employees and is led by a group of three managing partners. Our investment in Pátria is a minority, non-controlling investment, which we record using the equity method of accounting. We have representatives on Pátria’s board of directors in proportion to our ownership, but we do not control the day-to-day management of the firm or the investment decisions of their funds, all of which continues to reside with the local Brazilian partners. ”
Page 9 of this SEC document:
https://www.sec.gov/Archives/edgar/data/1393818/000119312516481948/d129194d10k.htm
I don’t think the hard line banking talk should be the subject of this article. Perhaps it should be something along the lines of their relationship with Hillary Clinton and the political turmoil going on there that recently led to ousting of a democratically elected president with a corrupt president.
Sorry…not “just” made an investment. It was done in 2010.
sorry….another one….
s/b …..democratically elected president and replaced with a corrupt president.
The banking and currency cartels, world’s largest organised crime, and Hellery is their mob boss front. Enforcers Comey and NATO. Hitmen would be the TPP tribunal. They will rob entire countries.
All these people. Nothing to do. What are they supposed to do, grow food?
YES.
A clarification, please.
The Barnes Foundation which has, since 2012, been in
Philadelphia is a “swanky” lousy violation of almost everything
which Dr. Barnes had set up in his will.
The original Barnes Foundation was dedicated to educating
all levels of society by using an extraordinary and unparalleled
collection of art combined with handcrafts and gardens to raise
the quality of life and knowledge for all of humanity.
After Dr. Barnes died, the foundation was mismanaged and
the exact sort of people in Philadelphia’s snobbish elitist
political/business circles who Dr. Barnes loathed
took his visionary work (pun intended on multiple levels!)
and reduced it to the “swank” contemporary display of
virtual-ity it is today.
Barnes was deliberately belittled during his lifetime by the class of
the elite snobs who now use his name and collection to
pretend that they are sophisticated’
when, in fact, they are the worst kinds of frauds and predators.
Yes indeed. They could hardly wait to confiscate his collection and move it down town. I was fortunate enough to have been to it when it was housed in Barnes’ house. In the new facility they “reconstructed” the rooms from the original house but could not duplicate the flow, or the atmosphere. But now the upper crust no longer need to schlep out to the ‘burbs to see the Renoirs.
For this event they should turn all the paintings around. Perhaps the price tags are still on the backs; that would no doubt be more appreciated by the philistines of the DNC and Wall Street than the oil paint covered front surfaces.
Another note.
Shortly before the collection was moved/stolen to its current
salon, the Art critic for the New Yorker made a visit.
He had never before been to the Barnes foundation.
After his visit, he expressed a regret that he had not previously
visited because he, like so many other “connoisseurs,” had been
so brainwashed that he had had no idea what a unique treasure
it was until it was in the process of being erased.
Thanks for the pointer. Went to research Barnes and discovered his association with John Dewey. A remarkable man.
Lived in Philadelphia during the debacle of lawsuits over the relocation to a new building along the BF Parkway. Amazing story. Check out “The Art of the Steal,” a documentary based on the fantastic book by John Anderson, “Art Held Hostage: The Battle over the Barnes Collection.” I attended college in Philadelphia and took a botany class and the professor loved to take us out in the field. We went to three places consistently: Valley Green along the Wissahickon Creek, the Pine Barrens in South Jersey and The Barnes Arboretum at the Foundation in Merion Station. It was years until I actually went inside the mansion to view the art. Barnes hated the Philadelphia establishment and it is without a doubt the biggest heist of art ever.
Crooked Hillary.
The tragedy is not what Hiliary Clinton says and does.
The tragedy is that the Pied Piper of Vermont is consciously leading his followers into the Hiliary Clinton vortex.
Sad day for all except Wall Street.
Good article, but “shadow banking” could use some more unpacking:
https://incomeclub.co/mutual-funds-and-etfs-are-the-shadow-banking-system/
The ratio of money lent out by a commercial bank, vs. cash held on hand, is regulated by the federal government, but “shadow banking” uses financial devices that evade these regulations. But let’s say that people suddenly panic and want to pull their money out of these investments?
The restoration of Glass-Steagall rules (the real “shattered glass” the Clintons were involved in) might do something to prevent this scenario, and Glass-Steagall (an FDR-era law) would also have prevented the 2008 economic collapse – but it also reduces profits and fees for Wall Street.
For Wall Street disasters, the U.S. government serves a “historical function of the buyer of last resort,” as in the 2008 bailout. What Wall Street wants from Clinton is probably a pledge to continue to serve this function, a promise that she would never pull an FDR and rescue middle class people while forcing the big Wall Street interests to eat their losses in the next major crash, which is probably not too far in the future.
Incidentally, Hillary Clinton backed a bill in 2001 that was directly related to setting up the 2008 collapse:
My knowledge of this stems from an association with a mortgage broker whose job was to generate subprime loans for banks in the 2000’s; the firm he worked for was contracted by big banks for this purpose. He’d say things like “I just sold this nice old lady this loan that’s going to cost her extra thousands down the road, but I got an extra $1000 on my commission, and that’s what the boss wants, that’s what the banks are paying us for.” He drank a lot and had a cocaine habit, typical for that industry.
“The ratio of money lent out by a commercial bank, vs. cash held on hand, is regulated by the federal government, but “shadow banking” uses financial devices that evade these regulations.” True but the banks have ways to get around that, in the form of CDOs (among other things). If there were really meaningful reforms of the banking industry, any institution making a loan would be required to hold some substantial portion of the loan balance, in the bottom tranche. Before all the so-called innovations that Michael Lewis exposed starting with “Liars Poker”, banks actually held the paper for the loans they made, and for that reason did a really good job of due diligence, and avoided risk-inducing incentives such as variable interest rates. But now the game is to find suckers unwilling or unable to read the fine print, sign the papers then sell them off.
At some point as greedy are unwilling to sell to the sleeping point, and gs doesnt want to be caught holding the bag, and wages are so depressed that funds dont have the wherewithall to buy that bag, war of the wealth funds?
That will be interesting. Having seen how gs schemed the shorting of packaged mortgages, they must have a scheme on the ready to buy up the entire world’s economy. What else is there to do but own it all?
Look no further than Hillary’s TPP loving VP running mate and listen to the blunt declaration of her good friend Terry McAuliffe; he can try to walk it back forever, but he did let the cat out of the bag, Hillary will say anything to get elected.
https://www.washingtonpost.com/news/the-fix/wp/2016/07/27/why-terry-mcauliffes-tpp-gaffe-is-so-damaging-for-hillary-clinton/
Yep. Follow the money. Corrupt politicians: Say one thing, do another.
The question is do you vote for the wild card sticking his finger at the elites: Trump?
BANKRUPTCY. That is what DT knows works for business. When the demands of the richer begin to burn the business, bankruptcy will cast them off so the business may continue. BANKRUPTCY IS GOOD FOR PEOPLE & BUSINESS, NOT WEALTH HOLDERS.
And that scares the bejesus out of wallstreet.
You are right about this; the basic solution to the $1 trillion student loan debt crisis is to allow students with massive debt to file for bankruptcy and force the private sector holding those loans to write off their losses.
Yes, this would make the private sector unwilling to make huge student loans; so universities would have to cut salaries for administrators (University of California chancellors get paid twice as much as the U.S. president) and lower student fees; at the same time federal funding for universities would have to rise. This is all do-able if we cut the NATO budget (Trump suggestion) and redirect those funds to higher education (Sanders suggestion).
“Say one thing, do another.” Yes, and their sayings are loaded with double meanings.
Trump isn’t a politician and he speaks off the cuff, risking direct communication with hostile journalists (be honest there’s no mistaking that the entire establishment media is out to squelch his chances).
On the other hand, Hillary, the lifetime politician, doesn’t give press conferences anymore, she needs time to craft her responses via focus groups, (seems “It Takes a Village” to raise a speaking point for her.)
Trump’s hyperbole and off the cuff remarks shock because we’ve gotten so used to the political non answers we’ve let our leaders get away with in elevating themselves above honest human personal conversation.
It’s some sort of higher dialect only understood by insiders after being sworn into the club, isn’t it?
Donald is actually likeable and has friends whereas Hillary has associates, nothing will make her melt it seems. Her smiles and laughs are out of tune, a bit off, sometimes horribly so (Libya).
Yes, of course I’ll vote for a human being “wild card sticking his finger at the elites: Trump” instead of a wooden woman manufactured in Gepetto’s workshop, who never quite made it to fully functioning consciousness despite sprouting long nose, donkey ears, and tail for continuous lying.
The TPP lies and military industrial financial complex loyalties that built Hillary are enough to know she’ll never care for we flesh and blood people. Unlike her brother-in-wood, Pinocchio, she chose to stay with the wrong crowd many, many years ago and petrified in her ways.
To quote her, “What difference, at this point does it make!?!” It is now known the a person’s DNA evolves through life, but not after a certain point, she’s clearly past that opportunity to be a compassionate human leader of the world.
Don’t worry too much, as Tom Hanks said just recently we’ll be Okay if Donald Trump is elected.
Excellent sources within this article, plenty of leads to conduct my own research.