Tuesday, February 11, 2014

DealBook Panders to PEU Rubenstein, Schwarzman

DealBook reported on the #21 and #23 top donors from 2013.  Both are private equity underwriters (PEU's):

David M. Rubenstein, the co-founder of the private equity giant Carlyle Group, is a fan of the John F. Kennedy Center for the Performing Arts. So much so, in fact, that he donated $50 million to the center last year. His total donations of $121.7 million ranked No. 21 on The Chronicle of Philanthropy’s 2013 list of top American donors.

Among Wall Street moguls, Mr. Rubenstein narrowly beat out another private equity tycoon, Stephen A. Schwarzman, the head of the Blackstone Group, who gave away $103 million last year. His top receiver was Tsinghua University, a research school based in Beijing.
One has to shake their heads at this description of private equity, masters of greed and manipulation.  How many of these donations involved the permanent naming of something Rubenstein or Schwarzman?  DealBook added:

“These people have an incredible problem-solving focus,” said Jonathan Haidt, a professor of business ethics at the New York University Stern School of Business.

Mr. Haidt pointed out why private equity specifically might fit this mold. “Private equity is all about coming in, finding the inefficiencies, ripping them out, putting in better procedures and making the thing more valuable.”
"Ripping out inefficiencies" like people and pensions.  "Better procedures" like PEU annual management fees and special distributions.  "Making the whole thing more valuable" via debt balloons requiring affiliates to pay dramatically higher interest costs and significantly lower taxes.  All so they can flip the thing in one to five years time for a multiple of their original equity investment. 

That a professor of business ethics offered standard PEU drivel is more disturbing.  But that's the state of business in our world, where executive compensation grows while jobs are slashed. 

P.S.  The twenty higher donors DealBook missed can be found here.