Millionaires and billionaires have resumed their ostentatious and tin-eared ways.
After the dust cleared from the economic implosion of 2007-2008, being rich became briefly unpopular. Investment firm CEOs, Wall Street bankers and craven house flippers had crashed the economy, and as details of their Gatsby-esqe lifestyle surfaced—Lehman Brothers CEO Dick Fuld, for instance, took a helicopter to work before his century-old firm collapsed—their conspicuous consumption turned insult to injury.
That didn’t last long. Bank and corporate profits rebounded quickly, and with all but one banker getting off the legal hook, hardly anybody suffered any consequences for ruining the economy. Sure enough, millionaires and billionaires resumed their profligate, ostentatious and tin-eared ways, but whereas before the bubble burst these were badges of a surging economy, now they came off as self-parody. From arguing for a $2 wage to buying $150 million sculptures, here are the worst of the rich from the past seven years.
The most hubristic example comes in the form of the two entities suing the federal government for bailing them out during the financial crisis. As the Washington Post reported this week, both former AIG CEO Hank Greenberg and the shareholders of Fannie Mae and Freddie Mac have seen suits once considered shots in the dark suddenly snag the eye of sympathetic judges, setting them up for an unexpected payday from the same entity that kept them from collapsing.
Greenberg oversaw AIG for decades as its chair and initiated many of the practices that left it dangling over its 2008 precipice, the same week Lehman Brothers collapsed. The government pumped an astonishing $85 billion into the bank—in exchange for 80% ownership.
It’s that last part Greenberg objects to, arguing the government “diluted” shares of the stock before seizing it in what amounted to a punishment of shareholders, a penalty not imposed on other bailout recipients. Greenberg considers that stock his property, and he wants $23 billion worth of it back.
The U.S. government can barely believe its ears. AIG was days from bankruptcy when the feds injected it with a life-saving infusion of cash. Further, it was AIG that had asked for the government intervention, and had agreed to the stock as a trade. Greenberg, who was kicked out of the company in 2005 but still owned a good deal of that stock, doesn’t care: he thinks the government bullied him and his shareholders in 2008 in saving his company, and the 90-year-old wants revenge.
Major shareholders for Fannie Mae and Freddie Mac, meanwhile, have sued the government for post-bailout profits on the public/private hybrid mortgage financers. The government put the failing mortgage giants into a conservatorship in 2008 and pumped almost $200 billion into them. Along the way it created “preferred shares,” some of which went to the government, and others of which were sold at a massive discount to private traders.
But the government’s plan was always to phase out the companies, which essentially federalized risk in exchange for private profit. In the meantime, having sold the shares at a discount, the Treasury has been keeping most of the profit, not entirely out of line given that it saved the company in the first place. But while efforts to replace the companies have stalled, shares have risen almost 1400%, and the shareholders now argue that the Treasury’s keeping of the profits amounts to a Fifth Amendment violation.
The judge looks to be buying it, no pun intended. As a result, investors are gobbling up Fannie Mae and Freddie Mac stock in anticipation of Greenberg’s win, with one market watcher calling it “the most interesting risk-reward that I am aware of in the capital markets right now.” That’s bust to boom in seven years, thanks to the government its shareholders are now suing.
Those demanding the government give back the money are an evolution from the more standard post-crash line that the government actually precipitated the crisis, despite the banks’ criminal (and unpunished) behavior.
Fuld, in his first public appearance since the collapse of Lehman Brothers made him a national pariah, actually blamed lack of oversight on his own industry for some of the mess (a lack of oversight Lehman very much took advantage of in the mid-aughts) while reserving the lion’s share of the blame for the Federal Reserve, which he argued triggered the crisis with its control of interest rates. In Fuld’s formulation, Lehman Brothers was actually a victim, either of government regulation or lack thereof.
Some have gone so far as to argue that the regulations, watered down though they are, put in place since the collapse will actually cause the next crisis, as Blackstone CEO Stephen Schwarzman argued in the Wall Street Journal this week. Schwarzman, an equity advisor worth billions and with a thing for lavish birthday parties, is especially troubled by the Volcker Rule, which prohibits banks from making speculative trades with customers’ funds, one of the most reckless practices that contributed to the economic collapse.
According to Schwarzman, this rule is unnecessary, as banks have regained their strength (as if that were the problem the first time around) and moreover will cause banks to hoard liquidity, denying it for loans and triggering a downward spiral. Thus, the only way to stop the next financial disaster is to repeal the main rules put in place to prevent it—the same rules that Fuld bemoaned caused the last meltdown.
These are the rich who want the rules to change for themselves. A number of them are also running around telling the rest of us that we need to make do with less or else some vague economic catastrophe awaits us. (The idea that the rich might make do with left is always spoken of as shadow socialism.)
So it was with Gina Rinehart, an Aussie who inherited an $18 billion mining fortune, who implied that if the poor wanted more jobs they needed to start matching the developing world’s wages of $2/day. “The evidence is inarguable that Australia is becoming too expensive and too uncompetitive to do export-oriented business,” Rinehart said in 2012. “Africans want to work, and its workers are willing to work for less than $2 per day. Such statistics make me worry for this country’s future.” If Rinehart recognized that Australia’s working class making $440/year might have some impact on her country’s economy as well, she didn’t show it.
Meanwhile, Goldman Sachs CEO Lloyd Blankfein was less worried about workers’ wages than how long they’d be earning them, telling CBS News in 2012 that the retirement age needed to be raised to fix entitlements because “we” can’t afford them. Raising the retirement age is a common solution aired by think tankers and New York Times columnists, all of whom have easy, low-stress jobs they can comfortably continue past the age of sixty-five. It’s a much different story for the rest of the world that is often rundown by decades of physical labor. That many have to work even longer because their retirements were injured by the financial collapse was apparently not something that bothered Blankfein.
Plutocrats are even invading the delivery room. In a now-infamous (and disputed) anecdote from an Elon Musk biography, a former worker said Musk scolded him for missing a company to-do to be present at the birth of his child. According to the employee Musk told him it was “no excuse,” adding, “you need to figure out where your priorities are.” (Musk denies having said this.) Apparently making do with less includes family births.
Then there’s the increasingly lavish ways plutocrats find to spend their excessive wealth. Steven Cohen, a Connecticut hedge fund manager worth billions of dollars, was revealed this week as the mystery purchaser of “Pointing Man,” an Alberto Giacometti bronze statue bought from Christie’s last month for $141 million, making it the most expensive sculpture ever sold. (In 2006, David Geffen sold a Jackson Pollack for $140 million, one of the most expensive paintings ever sold.) Cohen, in true plutocrat form, recently settled the Security and Exchange Commission for insider trading, paying almost $2 billion in fines.
“Pointing Man” is not even Cohen’s most ridiculous possession. That award will have to go to Romeo the pig, a gigantic hog who, lest you were feeling successful in life, had his own room in Cohen’s mansion. Romeo was of a piece with Cohen’s interest in fashion, as one rumor had it that “the pig had a tattoo on his face and that he appeared to be a walking piece of art.” Feel bad for Romeo, as he was dispatched to a vegan farm for being too ornery. Maybe next time he should settle for $2/day.