3 Reasons To Be Worried About the Blackstone Group—and Their Friend, Hillary Clinton

Leaked emails show Clinton’s advisers sought to “develop a real relationship with” the controversial private equity firm.

Branko Marcetic October 19, 2016

Wikileaks releases show John Podesta and Neera Tanden, pictured here with Clinton in October 2013, planning for the campaign to cozy up with Blackstone executives. (Chip Somodevilla / Getty Images)

Buried among the thou­sands of John Podesta’s emails released over the last week, you’ll find a short, reveal­ing exchange between Hillary Clin­ton cam­paign chair John Podes­ta and Neera Tanden, pres­i­dent of the Cen­ter for Amer­i­can Progress and Clin­ton advisor-in-waiting.

“Shadow banking” represents such a risk that one politician criticized Bernie Sanders’ plan to break up the banks as insufficient because it did not deal with the problem. That individual? Hillary Clinton.

I saw Jon Grey [sic] today,” writes Podes­ta. We both sang your praises.”

He’s a real­ly good guy,” she replies. And giv­en he will take over Black­stone, one to devel­op a real rela­tion­ship with.”

Podes­ta and Tanden were talk­ing about Jonathan Gray, the glob­al head of real estate and mem­ber of the board of direc­tors of the Black­stone Group, a Wall Street pri­vate equi­ty firm that is now the largest sin­gle own­er of real estate in the entire world. This wasn’t the only appear­ance Black­stone has made in the Podes­ta emails. Anoth­er thread from Jan­u­ary 2016 shows Clin­ton staff try­ing to arrange a din­ner with Gray and the company’s Num­ber 2, Tony James, as well as Tim Gei­th­n­er and Lar­ry Sum­mers, two for­mer Oba­ma admin­is­tra­tion offi­cials wide­ly cred­it­ed with spear­head­ing Obama’s soft-on-Wall-Street policies.

In fact, despite Tanden’s email, Black­stone already has sub­stan­tial ties to Clin­ton and the Demo­c­ra­t­ic Par­ty as a whole. James not only meets reg­u­lar­ly with both Oba­ma and Clin­ton, but has held two fundrais­ers for Clin­ton in the past year, includ­ing one last month where atten­dees paid from $50,000 to over $100,000 to rub elbows with the Demo­c­ra­t­ic can­di­date. Clin­ton is the sec­ond biggest recip­i­ent of Black­stone mem­bers’ mon­ey this cycle, nar­row­ly behind Mar­co Rubio, and while the firm con­sis­tent­ly gives more to Repub­li­cans, they’ve donat­ed mil­lions of dol­lars to Democ­rats in the past few years.

The mutu­al admi­ra­tion between Clin­ton and Black­stone exec­u­tives, and their attempts to woo each oth­er, should con­cern any­one eager to see Clin­ton — at this stage, fol­low­ing the implo­sion of the Trump cam­paign, the like­ly win­ner of the elec­tion — fol­low through on a pro­gres­sive agen­da once in office. Black­stone has a less-than-stel­lar record of shady busi­ness deal­ings and red flags.

1) They’re in the slum­lord business

After the hous­ing crash left mil­lions of U.S. home­own­ers under­wa­ter, Black­stone swooped in and lined its pock­ets from the mis­ery of ordi­nary Amer­i­cans. As home­own­er­ship rates have dipped, Black­stone, through its sub­sidiary Invi­ta­tion Homes, has become the largest own­er of sin­gle-fam­i­ly rental homes in the coun­try, buy­ing up tens of thou­sands of vacant, fore­closed homes.

As a 2014 In These Times inves­ti­ga­tion revealed, once these hous­es were occu­pied by ten­ants, Black­stone oper­at­ed more as slum­lord than land­lord. Across the coun­try, the com­pa­ny left homes in dis­re­pair, shift­ing the respon­si­bil­i­ty of main­te­nance to ten­ants and ignor­ing con­stant requests to fix elec­tri­cal and plumb­ing prob­lems. One ten­ant had no less than six prop­er­ty man­agers over the course of a sin­gle year. In Atlanta, many ten­ants have no one to whom they can relay com­plaints direct­ly, instead forced to nav­i­gate a straight-to-voice­mail system.

Black­stone has vio­lat­ed ten­ants’ rights in oth­er ways too. It has hit ten­ants with sud­den, unrea­son­ably quick evic­tions, in one case send­ing a res­i­dent a five-day evic­tion notice after the company’s own online pay­ment sys­tem failed to deduct the tenant’s rent for the month. In oth­er cas­es, it sent evic­tion notices before the rent was even due.

Such rapid evic­tion may be moti­vat­ed by the desire to sell homes that have accrued in value.

The com­pa­ny also charges ten­ants as much as 180 per­cent of a city’s mar­ket rent and is not above rais­ing the rent any­where around 10 per­cent or more in lease reewals.

2) They’re engaged in shad­ow banking

Fol­low­ing the dereg­u­la­to­ry free-for-all of the late 90s and ear­ly 2000s, banks engaged in all kinds of risky behav­ior that ulti­mate­ly tanked the glob­al econ­o­my. While they were most­ly let off with a slap on the wrist and a few harsh words, pol­i­cy­mak­ers did insti­tute some reg­u­la­to­ry changes to pre­vent a future cat­a­stro­phe. One of these was to increase scruti­ny of lending.

This left many banks more reluc­tant to lend, and in response there’s been a trend toward shad­ow bank­ing,” or non-banks engag­ing in lend­ing. Accord­ing to a 2015 report by Gold­man Sachs, shad­ow banks” — of which Black­stone is one — are respon­si­ble for 41 per­cent of all lend­ing, or near­ly $5 tril­lion worth, while avoid­ing the same reg­u­la­to­ry over­sight as tra­di­tion­al banks.

Nor are shad­ow banks bound by the so-called Vol­ck­er Rule, part of the 2010 Dodd-Frank Wall Street reform bill. This bill pro­hib­it­ed banks from pur­su­ing cer­tain kinds of prof­it-dri­ven trad­ing, as well as restrict­ing com­mer­cial banks’ invest­ments in hedge funds and pri­vate equity.

Shad­ow bank­ing” rep­re­sents such a risk that one politi­cian crit­i­cized Bernie Sanders’ plan to break up the banks as insuf­fi­cient because it did not deal with the prob­lem. That indi­vid­ual? Hillary Clin­ton.

3) They want your retire­ment savings

The Unit­ed States has one of the high­est per­cent­ages of pen­sion­ers liv­ing in pover­ty in the world, with 21.5 per­cent of those aged 65 or old­er receiv­ing an income less than half the nation­al medi­an. Blackstone’s Tony James’ solu­tion to this prob­lem, how­ev­er, as he laid out in a Jan­u­ary email to John Podes­ta, is not to make Social Secu­ri­ty bet­ter fund­ed, which he sug­gest­ed isn’t polit­i­cal­ly viable” or imple­mentable.”

Rather, James, togeth­er with the New School’s Pro­fes­sor Tere­sa Ghi­lar­duc­ci, col­lab­o­rat­ed on a retire­ment sav­ings plan (called, fit­ting­ly, the Retire­ment Sav­ings Plan”) that would see work­ers and employ­ers invest 3 per­cent of an employee’s salary each year into high-yield­ing and risk-reduc­ing alter­na­tive asset class­es like real estate, hedge funds, man­aged futures and com­modi­ties.” Ghi­lar­duc­ci also hap­pens to be one of Clinton’s advis­ers, and accord­ing to the email, Podes­ta expressed inter­est” in the plan.

There are sev­er­al things wrong with the scheme, how­ev­er. Not only do hedge funds under­per­form — the Ken­tucky Retire­ment Sys­tems, for instance, invests in a hedge fund that brought a return of 1 per­cent over three years, includ­ing a return of neg­a­tive 8 per­cent in 2016 — but they also siphon off prof­its in the form of exor­bi­tant fees. For these rea­sons, pen­sion funds have been aban­don­ing hedge funds in recent years. As author Jane White point­ed out, real estate and man­aged future funds aren’t par­tic­u­lar­ly risk-reduc­ing” either. Not to men­tion the fact that the James plan would reduce employ­ee con­tri­bu­tions from 5 per­cent, already one of the low­est in the world.

Of course, even if such a scheme would hurt pen­sion­ers, it might serve to ben­e­fit com­pa­nies that deal in real estate, hedge funds and man­aged futures. A com­pa­ny that is the world’s largest dis­cre­tionary investor in hedge funds.” A com­pa­ny like Blackstone.

Branko Marcetic is a staff writer at Jacobin mag­a­zine and a 2019 – 2020 Leonard C. Good­man Insti­tute for Inves­tiga­tive Report­ing fel­low. He is work­ing on a forth­com­ing book about Joe Biden.
Limited Time:

SUBSCRIBE TO IN THESE TIMES MAGAZINE FOR JUST $1 A MONTH