Thursday Links: Buffett, Chicago/Illinois, Atlanta Teachers


Here are today’s topics, in no particular order:

(1) Warren Buffett, the Greedy Grandfather of Omaha:  Joe Nocera had a puff piece in the New York Times last March invitingly called  How Warren Buffett Does It, discussing the magic of Buffett’s “value investing.” Thankfully, lots of the online comments called b.s. on Nocera, pointing out the unseemly sources of some of Buffett’s wealth. Several comments mentioned the great work of David Cay Johnston, in whose 2012 book The Fine Print: How Big Companies Use “Plain English” and Other Tricks to Rob You Blind Buffett makes several appearances. (Find Steve Pressman’s review of The Fine Print from our Nov/Dec 2012 issue here; check out DCJ’s 2011 Tax Analysts piece, Warren Buffett Wants Your Taxes, on Buffett’s tendency to divert tax dollars into his own pocket; read Dean Baker and David Cay Johnston, in an October 2012 FDL Book Salon on The Fine Print).

Now two more bits of evidence about how Warren Buffett really does it:  First, Naked Capitalism republished Raúl Ilargi Meijer’s Automatic Earth piece, Warren Buffett Is Everything That’s Wrong with America, about Buffett’s plan with Brazilian 3G Capital to merge the food giants Heinz, Kraft, and Oscar Mayer. Here is the money quote: “Buffett, the supposed genius, can only do these deals because nobody demands anybody to pay for the externalities that arise as a result of Warren pushing crap posing as food upon the American people. And then when he’s done getting even richer off of poisoning your kids, he’ll donate billions to their well-being.”

The more shocking recent piece comes from Daniel Wagner and Mike Baker, written for the Center for Public Integrity and the Seattle TimesWarren Buffett’s mobile home empire preys on the poor, with the subtitle “Billionaire profits at every step, from building to selling to high cost lending.” This investigative report is about how Clayton Homes, which is owned by Buffett’s Berkshire Hathaway, and which in turn owns a chain of mobile home companies with different names, helps push people into high-priced mobile-home mortgages through predatory lenders also owned by Clayton itself. And Berkshire Hathaway has its hand in the mobile-home manufacturing business too, so the whole predatory web funnels profits from people of modest means into the billionaire’s pockets.

I think it’s time to take to Twitter and ask @WarrenBuffett and @claytonhomes how they respond to the charges made in Daniel Wagner and Mike Baker’s piece Warren Buffett’s mobile home empire preys on the poor.

(2) Chicago and Illinois:  The main election result in Chicago, Rahm “Mayor 1%” Emanuel winning re-election (spending some ten times what his run-off opponent, Jesús “Chuy” García, did) was super-depressing, but even worse, for me, was the fact that Chicago’s UNITE-HERE Local 1 endorsed Emanuel (though with some laudable push-back from other unions in the city, who gleefully mocked the #RahmLove hashtag on Twitter, and by former UNITE-HERE staffers, according to Micah Uetricht’s post, Over 40 Former UNITE HERE Staff, Volunteers Rebuke Union for Endorsing Rahm Emanuel, at Working In These Times.

Just before the elections, Naked Capitalism’s Lambert Strether had a post, Rahm Emanuel and Rick Perry Hold Public in Bipartisan Contempt, about how Chicago’s Emanuel and Texas’s Perry have figured out how to dole out multi-millions of dollars to companies (campaign donors, surely) with no bidding process, no transparency, and no accountability (e.g., about whether the companies create jobs they are supposed to create.

There was at least one (possible) positive outcome to the elections in Chicago, as Kari Lydersen reported, also at Working In These Times: On Chicago’s Southeast Side, Union-backed Sue Sadlowski Garza May Have Defeated a Rahm Emanuel Ally.  Sue Sadlowski Garza was one of several teachers to challenge pro-Rahm incumbents, but I think the only one to get to the run-offs, and she was just a few votes ahead last I checked, but hopefully she will prevail.

And Chicagoans also have to worry about Governor 1%: Bruce Rauner. In great interview from a while ago on Doug Henwood’s Behind the News, longtime lefty union organizer Jane McAlevey talks about Gov. Bruce Rauner’s attack on public-sector unions in Illinois, and about how the reactionaries like Rauner have an analysis of power that they pursue with precision, and the left needs to get one instead of floundering around. She made similar arguments in a piece in The NationWe Need Syriza in Illinois.

There was a lot of fuss on The Facebook among progressives about the so-called “religious freedom” law in Indiana, and rightly so. Mainstream and right-wing commentators claimed that the Indiana law was the same as the federal law and the law in a bunch of other states–but they were wrong. (David Brooks, unsurprisingly, was one of those to get it wrong (here).) The two best pieces I saw on this were from Garrett Epps in The Atlantic (What Makes Indiana’s Religious-Freedom Law Different?), and from Bill Black at New Economic Perspectives (The Homophobic Law and the Indiana Governor Who Dares Not Speak Its Purpose, plus this post responding to criticisms). Indiana has no LGBT anti-discrimination law, for one thing; but Bill very usefully points out how the Indiana law pointedly drafted to be extreme. (What I thought was the really wacky part of the law was the provision that allows you to make up your own religion: “Sec. 5. As used in this chapter, ‘exercise of religion’ includes any exercise of religion, whether or not compelled by, or central to, a system of religious belief.”

But once you listen to Jane McAlevey on Rauner’s coup in Illinois, you’ll wish there were as much of an uproar on social media about what’s going on in Illinois as there has been about what’s going on in Indiana.

(3) Atlanta Teachers vs. Wall Street Bankers:  Bill Black had a great post on New Economic Perspectives (cross-posted on Naked Capitalism) about the recent sentencing to prison of teachers who changed their students’ high-stakes test scores: We Send Teachers to Prison for Rigging the Numbers, Why Not Bankers? Bill focuses on all the investigative and prosecutorial resources that went into the cheating scandal, when massive bank fraud is considered too difficult to prosecute. David Dayen made similar points at The Fiscal Times (The Biggest Outrage in Atlanta’s Crazy Teacher Cheating Case), but he emphasizes (what I’m betting Bill would agree with) that it’s not obvious the teachers should have been prosecuted at all.

And there was this really wonderful unsigned (as far as I could tell) post at the Crunk Feminist Collective website: Teachers Are Not Magical Negroes–an homage to teachers who encourage Black students to succeed, connecting their struggles to the Atlanta cheating scandal (or the scandal of the harsh punishment those teachers received). Money quote: “We treat smart Black kids and dedicated Black teachers like magical Negro unicorns that can individually save the world when the truth is that we need massive dedicated resources and structures to support us. We put students and teachers in impossible positions, berate them daily, and then wonder why our school systems are struggling. If we really believe that black lives matter, they need to matter in the classroom and in the schoolhouse too.” (For an explanation of the “Magical Negro” trope, see this entry at the wonderful and often radical TV Tropes site, or this Wikipedia entry.)

–Chris Sturr

Siding with Wall Street’s “Winners”

A piece by William D. Cohan in the current issue of Vanity FairWall Street Executives from the Financial Crisis of 2008: Where Are They Now?, is pretty harsh on the bankers who lost their top positions in the 2008 meltdown (Jimmy Cayne of Bear Stearns, Stan O’Neil and John Thain of Merrill Lynch, Ken Lewis of BoA, Angelo Mozilo of Countrywide, Dick Fuld of Lehman), chronicling their downfalls, their enormous severance packages, much smaller amounts in fines and penalties they had to pay, the ginormous mansions or penthouses they now live in, and their refusal to speak with Cohan about the financial crisis. In contrast, the “survivors” of the meltdown (Gary Cohn and Lloyd Blankfein of Goldman Sachs and Jamie Dimon of JPMorgan) did speak with Cohan, and Cohan is a bit easier on them. Cohan quotes Dimon in ways that make him sound wise and high-minded, e.g., when he says that there was a better approach than TARP and the bailout of the banks, which tarnished the whole banking industry:

In retrospect, Dimon says, a better way to rescue the system may have been to dismantle the banks that screwed things up. “If management ruined their companies, their boards should have been fired, management should have been fired,” he continues. “I support the clawbacks. I think that’s perfectly fine. The American public would have received some sense of justice being done.” He thinks there should have been some differentiation between well-run banks and poorly run banks: “If you said to me, how do I feel about some of these C.E.O.’s who walked away with $50, $100, $150 million and their company blew up? Terrible. It’s outrageous. I agree with them. Everyone says that’s bad. If this company went bankrupt, we should all give back the money we earned in the last five years or more. You wouldn’t have to ask me.”

And the article ends with an account of how “Dimon’s world was turned upside down last June” when he was diagnosed with throat cancer and underwent treatment, including radiation:

He also had six full days of chemotherapy. He lost 35 pounds. His body was burning some 4,000 calories a day because of the treatment. “It was hard to eat,” he says. “Your throat hurts. You have no appetite. Everything tastes just absolutely terrible. So you literally just search for the foods that you can get down.” Into this group fell oatmeal, scrambled eggs, and milk shakes.

By December, he was declared cancer-free. Whew!  But the experience made him confront his own death:

He is not yet sure how the bout with cancer has changed him. He believes the way he can still make the most difference for the world is at JPMorgan. “I really mean that,” he says. He talks about jobs that can be created through providing capital to companies. He talks about how the firm has hired 8,000 military veterans and is investing in Detroit.

So what started as a piece about how various Masters of the Universe have weathered the financial crisis (and what looked like it would be about how many of them made a killing and ended up quite comfortable, despite fraud, recklessness, malfeasance) ended up as a sympathetic piece about the “survivors” (i.e., the winners) of the crisis.  (The URL for the of the online version of the piece even reflects this shift, mentioning Dimon’s cancer when the title of the article doesn’t: It’s a little surprising, since Cohan has been harsher on Dimon and the bankers (e.g., in this NYT Opinionater piece from May 2011, which anticipates the Occupy movement, in which he speaks favorably of Nicholas Sarkosy’s excoriation of Dimon at Davos that year).

You wouldn’t know, from Cohan’s piece, that JPMorgan has been fined more than $35 billion in the three-and-a-half-year period ending at the end of 2014, according to (JP Morgan’s Fines to Date: A Brief History), or that “[n]early all of the penalties were tied to the financial crisis and the company’s promotion and use of mortgage-backed securities.” Maybe Cohan assumes that his readers know or remember this, but wouldn’t it have been a good rejoinder to Dimon’s high-minded claim that the poorly-run banks should have been dismantled and their executives punished? (As the LA TImes‘ Michael Hiltzik points out (The Myth of the Obama ‘Attack’ on JPMorgan’s Jamie Dimon), it is pretty rich that Dimon whines about being persecuted by the Obama administration when the fines have come from many directions besides the federal government, including “several state attorneys general, the European Commission, the British Financial Services Authority and the government of Switzerland” (for LIBOR manipulation), the British Financial Services Authority and other regulators (for the “London Whale” losses), the Madoff securities estate (for complicity in Madoff’s Ponzi scheme), and from the California Independent Independent System Operator, the government of the city of Milan, and the attorneys general of New York and Florida. And this is putting aside any disagreement we might have with what appears to be the Obama administration’s policy of pursuing fines against the banks instead of criminal prosecution of the bankers.

And you wouldn’t know, from Cohan’s piece, that Dimon told the Federal Crisis Inquiry Committee in 2011 that “In mortgage underwriting, somehow we just missed, you know, that home prices don’t go up forever and that it’s not sufficient to have stated income.” As Bill Black puts it in a great recent blog post, we’re supposed to think that “JPM just forgot that lenders need to underwrite their loans and that financial bubbles cannot continue indefinitely.  JPM is the world’s largest bank.  Tens of thousands of people would have to simultaneously forget the same points that had been drilled into them over the course of their education and professional employment.  Tens of thousands of JPM employees would also have to forget that their loan manuals existed.  Dimon’s claim is the stuff of bad science fiction.” As Black points out, on 2012, in JPM’s annual letter to shareholders (where he seems to say different things than what he says to financial journalists and government commissions), Dimon indicates that he understands underwriting a little better than that:  “Low-quality revenue is easy to produce, particularly in financial services.  Poorly underwritten loans represent income today and losses tomorrow.” Black again: “Dimon’s statement is pithy and captures the essence of the fraud recipe and its sure things.”

An extreme case of celebrating and sympathizing with the victors is the recent scandal of SEC offical Andrew “Drew” Bowden, who was caught on camera issuing fawning praise for the private equity industry and even joking that he’s encouraging his teenage son to go into the industry (see video above, or here). The story was broken by Yves Smith at Naked Capitalism (The SEC’s Andrew Bowden: A Regulator for Sale?), and covered by Matt Taibbi at Rolling Stone (Regulatory Capture, Captured on Video) and by the LA TImes‘ Hiltzig (Bankers Are Complaining Again–About Too Much Regulation).

The remarks he made at Stanford are bad enough on their own; joking about his son entering the field was bad, but it’s the attitude toward Wall Street’s wrongdoing vs. its “success” that is really appalling. Bowen said:

Like what, who else out there is in a business that’s that good? And I reckon, it’s sort of interesting for me for private equity in terms of all we’ve seen, and what we have seen, where we have seen some misconduct and things like that, ’cause I always think like, to my simple mind, that the people in private equity, they’re the greatest, they’re actually adding value to their clients, they’re getting paid really really well, you know…

Taibbi remarks: “it reveals an attitude that’s absolutely poisonous among regulators, this fawning worship of people on Wall Street who maybe break a few rules, but that’s okay, because they make tons of money! Can you imagine Elliott Ness giving a speech gushing over what nice cars Al Capone drives? It’s revolting.”

And what is especially damaging for Bowen is that he was highly critical of the private equity industry just last May (see Spreading Sunshine in Private Equity), especially about the industry’s fees (something Yves Smith at Naked Capitalism has been hammering home on), and told Gretchen Morgenson of the New York Times that “[i]n some instances, investors’ pockets are being picked.” But since then Bowen has backpedaled (e.g., in the interview he did for this piece for Private Equity International), so that the Stanford remarks look like a complete turnaround–which is why the charge of regulatory capture fits so well.

 –Chris Sturr