Tuesday, May 22, 2012

More on Cory Booker

Before most people had heard of Barack Obama, Cory Booker was being suggested as USA's first black president.  He had degrees from Stanford and Yale and had been a Rhodes scholar.  This man had made contacts.  He was someone who could not imagine stopping his political career at mayor of Newark, New Jersey.  People with money had already tagged him as a prospect.

Whether he destroyed his political prospects on Sunday by calling attacks on "Private Equity" firms "nauseating" is still an open question.  He has been scrambling for political cover on Monday and has attracted some support.  Unfortunately for him, most of this support is tainted by Wall Street so has the effect of dragging him in deeper.

As I see it, he has two kinds of problems.
  1. There is a whole mini-business of selling bonds for and to governments.  If you ever want to see a rugby scrum of people dressed in power suits and Gucci loafers, hang around a city hall or state capital when the legislators are putting the finishing touches on a bonding bill.  To say that bond salesmen have an incentive to be nice to the politicians would be to indulge in massive understatement.  People in finance have probably been VERY nice to him on many occasions over the years.
  2. Then there is the little matter of his Rhodes Scholarship.  Folks who don't think about these things just assume that this scholarship is awarded to students who work very hard.  But the point of view of the Scholarship people is FAR more focused—they are charged with recruiting potential leaders from the various outposts of the English-speaking world so they can be inculcated with the official English establishment party line.  And since Cecil Rhodes, the guy who funded the scholarship, got rich by stealing everything of value in South Africa and shooting the natives who objected, it is not surprising that the Scholarship stresses an education in the various forms of force and fraud.  So when it comes to subjects like the legitimacy of "private equity" it is expected that Rhodes Scholars will sing from the correct hymnal—especially those who wish to be future leaders.
The most dangerous Rhodes Scholars, by FAR, are the ones with plebeian backgrounds and sympathies—Democrats who will say all the right things to get elected but when push comes to shove, will jump to the commands of finance capital.  Sen Bill Bradley of New Jersey, the man who welcomed Wall Street into the Democratic Party, was a Rhodes Scholar.  Bill Clinton, the man who got NAFTA passed and massively deregulated Wall Street including ending Glass-Steagall—Rhodes Scholar.  Bob Rae, the Canadian who managed to get elected as Ontario's Prime Minister from the "radical" New Democratic Party and then promptly sold out his labor supporters—Rhodes Scholar.  Notice a pattern here?

Cory Booker’s Slip Reveals Role of Private Equity in Local Government Funding

By: David Dayen  May 21, 2012

Against my better judgment I’m going to weigh in on this Cory Booker story. As you probably know, Booker appeared on Meet the Press yesterday and pronounced himself “nauseated” by the Obama campaign’s attacks on Mitt Romney’s record with the private equity firm Bain Capital. In a follow-up YouTube that looked like the kind of video hostage-takers make their victims record, Booker walked back the comments, saying that Mitt Romney’s record at Bain Capital is fair game for scrutiny, and that Romney “is not being completely honest with his role and his record even while a businessperson, and is shaping it to serve his political interest.”

None of this really interests me, but it is worth understanding Booker’s knee-jerk response against attacks on private equity. Steve Benen writes here that “plenty of Booker’s constituents work in private equity, so it stands to reason he’s going to defend the industry.” The median household income in Newark, New Jersey, where Booker serves as mayor, is around $36,000 a year, almost half of the rest of the state. 25% of the population sits below the poverty line. There are a couple more suburban parts inside the city limits, but the idea that Newark is teeming with rich private equity kingpins is just misguided. To the extent that “constituents” of Booker’s work in private equity, you’d have to be talking about his donors.

But more than that, Jason Kelly explains how Booker, and most other big-city mayors, have an ongoing love affair with private equity in a time of depressed investment from state and local governments.
The answer: New Jersey has a lot riding on private equity.

The state’s pension system in December agreed to a sweeping $1.8 billion deal with private equity giant Blackstone Group that will comprise investments in real estate, energy and debt funds. That brought New Jersey’s total commitments over 12 months to $2.5 billion to Blackstone alone, the most Schwarzman’s New York firm has attracted from a single investor in a single year since its creation.

There’s another reason Booker may have spoken up. While he doesn’t control New Jersey’s state pension, as the mayor of a big city Booker has a deep interest in economic development. The Private Equity Growth Capital Council was quick to seize on that angle. In an email this morning, the industry’s main lobbyist, amid a campaign to defend its practices, noted that New Jersey drew $3 billion in private equity investment last year into the state economy.
In fact, Booker alluded to this right after saying he wouldn’t indict private equity, noting that “Especially that I know I live in a state where pension funds, unions and other people invest in companies like Bain Capital.”

This is not limited to New Jersey; practically every state in the union uses private equity, particularly through their large pension funds. This creates a symbiotic relationship between state and local governments and vulture capitalists. The pension funds then invest in local economies, fattened by the higher returns they get from their entrusting of funds to private equity. This allows these firms, which specialize in stripping down companies and turning over profits, without regard for the workers they leave behind, to get inoculated by the political class, who want to keep this game going. more
There is Booker's view of the moneychangers, and then there is the view of the rest of us.  If Booker has suffered a major fall from grace, it is because he sees finance capital as flattering bond salesmen or friends with nice jobs on Wall Street.  The idea that these people are considered thieves of the lowest order by ordinary hard-working Americans is what he really finds "nauseating."

Wells Fargo Has Blood on Its Hands: Desperate Man Commits Suicide After Shocking Foreclosure Mistreatment

This is the story of what happens when an average couple is up against a giant, wealthy, powerful bank.
By Dave Johnson   May 15, 2012

Norman and Oriane Rousseau were one more couple pushed by a huge, greedy bank to the brink of homelessness. On Sunday, desperate and with nowhere to go, Norman Rousseau shot himself.

This is the story of what happens when an average couple is up against a giant, wealthy, powerful bank. Unfortunately the result is what the result always is when people are on their own against the wealthy and powerful: the bank ends up with all of their money, takes their house to sell and throws them out onto the street. In this case the bank is Wells Fargo.

The quick version of this terrible story is that Norman and Oriane Rousseau of Newbury Park, California were scammed into a predatory mortgage. But they made their payments anyway, always paying with a cashier’s check in person at the same branch. Then one day the bank misapplied their payment and said they still owed the money. This started a long, nasty process that led to the bank evicting the Rousseaus from their home.

Here’s the shocker: right at the start the Rousseaus came up with proof that the bank had received the payment and had cashed the check. But the bank continued to claim it had missed the payment, gave the Rousseaus the runaround, started applying fees, and used it as an excuse to foreclose on the house anyway.

The Rousseaus fought back, the bank dragged it out for so long and pulled so many tricks, getting its way every step of the process, until this last Sunday Norman Rousseau finally gave up and shot himself in despair – two days before the scheduled eviction, Tuesday, May 15. (The Rousseau’s lawyer just said he was able to win a 2-week delay.) more


  1. I know you follow ZeroHedge, but I wanted to insure that you saw this post about how Economists have sold themselves.

    More nuanced than what Cory Booker does, but maybe even more pernicious....


  2. Thanks for the link David. Yes indeed, the "economists" who have been selling the nonsense that is neoliberalism are going to have to find another line of work (or at least retrain themselves to believe something more believable.)