Wednesday, January 21, 2015

Private Jetting Davos Gives Lip Service to Inequality

Dealbook reported:

David Rubenstein, co-founder and co-chief executive of the Carlyle Group
Bullish on: the United States dollar, China, investing in Japan.
Oil prices: “Will stay low for a while.”
Concerned about: European banks holding Russian debt. “They could struggle again if Russia can’t pay off that debt.”
Other thoughts on energy: Renewables will take a hit from the oil price decline.
Regulation: He’s not complaining as it has been a major boon for his business, including its foray into lending.
Unintended consequence of regulation: Most creative minds in finance don’t go to banks anymore. “They go to hedge funds and private equity where they are more adequately rewarded.”

CNBC gave the following Davos update:

Inequality was a major topic on Wednesday, the first formal day of the WEF.

"We have a big problem in the United States," David Rubenstein, co-founder of private equity heavyweight Carlyle Group, said during a panel discussion on economic growth.
"If our GDP growth is 3.5 percent, that sounds great—corporate profits are terrific, stock prices are high—but what about the people left behind?" asked Rubenstein, himself a billionaire. 

Former Clinton Treasury Secretary Larry Summers told CNBC on Wednesday that middle-class incomes have not kept pace with the economic recovery.
Growth needs to be equally distributed, Summers said, "so we have a 'race to the top' rather than 'race to the bottom' when it comes to questions like taxation and regulation." 

"The middle class has to increase its wealth and we have to get better jobs, and it's going to have to be done, among other ways, through education," Blackstone Group head Stephen Schwarzman said on CNBC.

"We all have different views as to what level is the most important for education," the billionaire private equity boss added. "I think you have to start at the beginning, and you also can take enormous steps that can take people of very low income and get them to perform at very high levels." 

PEUs Rubenstein and Schwarzman made out like bandits after Gramm-Leach-Bliley, ushered in by one Larry Summers. Private equity has been all about paying fewer people, offering little to no raises and requiring them to do more.  Consider this from a former business reporter in July 2011:

There are very few people out there who will talk and write honestly about private equity. I know from personal experience that the financial press is so eager to break news on "deals" that reporters (who are increasingly compensated on the number of "market moving stories" they write) can't afford to be critical of Carlyle, KKR and Blackstone, and risk losing access to people at those firms.

I have seen so many people -- particularly those in their 50s - 70s -- taken apart by what has happened in their industry as greed has hollowed out the economy. These are people took pride in their jobs and held themselves to this invisible standard that we all just took for granted, but is being wiped out. 
The Carlyle Group scares me more than anything I've ever seen on Wall Street. It seems to exist to corrupt politicians and it's hard to know who they even represent.
I watched a video interview of (David) Rubenstein and his arrogance is really beyond tolerance. He was going on about the debt ceiling problem and how there would need to be cuts in services and higher taxes. When the reporter asked him about tax on carried interest he turned really disdainful and said that this "only" amounted to $22 billion over some number of years and this was not serious money. Boy, nothing like everybody doing their small part to save the country from oblivion!

Rubenstein left countless behind, as did Schwarzman.  Their words rise from the abyss of greed they've created and nurtured over the last thirty years.  The system produced that for which it was designed. PEU lamentations ring hollow, especially at Davos with its 1,700 private jets.