Steven Rattner: capitalist pig of the month

In the current issue of Vanity Fair, there’s a fascinating article on Arthur “Pinch” Sulzberger, the boss of the N.Y. Times who many blame, including author Mark Bowden, for causing the stock to decline from $50 in 2002 to $3.77 in February-less than the price of the Sunday paper as Bowden notes. It is now selling for $5.76 a share, hardly enough to inspire investor confidence. Rumors abound that the paper will be sold at a bargain rate, perhaps even to Rupert Murdoch-an archfiend in the eyes of Arthur Sulzberger, but not that much different politically. Bowden, a contributing editor at Vanity Fair, has exactly the background needed to write about the Times’s plummeting fortunes. Having written “Blackhawk Down” about the American military debacle in Mogadishu, he must certainly have a flair for how stupidity leads to disaster.

Despite my fascination with the N.Y. Times and the broader question of the “death of the newspaper”, my intention here is to shed some light on Steven Rattner, a character who gets a brief mention in the Bowden article:

His [Sulzberger] career progressed in prodigious and unearned leaps. He went from the Washington bureau, where he was close friends with Steve Rattner, Judith Miller, and a handful of other reporters, to New York, where he worked briefly as a very young assistant editor on the Metro desk, before moving on to stints in the advertising-and-production side of the paper, becoming deputy publisher in 1987.

Rattner? That name rang a bell. Wasn’t he the investment banker who Obama appointed czar of the auto industry? The very same guy who started out as a N.Y. Times reporter? Indeed he was:

A couple of months ago, Steven Rattner knew little about the U.S. auto industry.

But that didn’t prevent President Obama from recruiting him to solve one of the most vexing problems of the financial crisis — how to avert a catastrophic collapse of Chrysler and General Motors.

Rattner’s supporters argue that his diverse experiences — wealthy investment banker, prominent Democratic fundraiser, former New York Times foreign correspondent and fixture in upper-class Manhattan society — make him an ideal candidate to undertake such a daunting challenge.

(Washington Post, March 12)

Apparently, some of the soon-to-be-overhauled “decades-old practices” include the generous benefits won by the UAW when it was still had teeth. In an effort to help promote Rattner’s latest deal with UAW and Chrysler involving majority share ownership by the UAW as proof that we are living in some kind of new New Deal, the Times pretended today that the union still had the power to stand up to capital:

In the devastating slump that has forced one of Detroit’s automakers into bankruptcy and another to the edge of it, the United Automobile Workers union stands to become one of the industry’s few winners.

According to restructuring plans proposed this week, the union will have more than half the stock in Chrysler and a third of General Motors, meaning it will have tremendous influence, with the government, in determining the future of the companies.

Larry Christensen, a retired UAW member still suffering from the illusion that workers and bosses have opposing interests, had a different take on things in Labor Notes:

The media consensus is that union auto workers escaped the government-imposed restructuring of their industry basically unharmed, exchanging a few dings for control of the companies. Nothing could be further from the truth.

Chrysler retirees-like me-were assured in 2007 that our retiree health care benefits, funded through the Voluntary Employee Beneficiary Agreement trust, would last 80 years.

Now we lose all dental and vision coverage as of July 1, and an independent analyst says the VEBA, our entire health coverage, will last only six years.

We are supposed to be reassured by the fact that the VEBA will own 55 percent of the equity in Chrysler. But what good is owning a company after the value has been taken out? Chrysler’s former owner Daimler has already written its 20 percent stake in Chrysler down to zero on its own books.

There are questions, however, as to whether Steven Rattner can be an effective promoter of the ruling class agenda now that he has been revealed to be something of a crook:

Government officials are expanding their investigation of Quadrangle, the private-equity firm founded by the Obama administration’s lead auto negotiator, as new details emerge about an alleged kickback scheme involving the New York state pension fund.

On Wednesday, the New York City Comptroller William C. Thompson Jr. said he is working with the state’s attorney general, Andrew M. Cuomo, to determine whether the city’s pension funds were “intentionally misled or deceived” by Quadrangle’s failure to disclose the use of a middleman who has since been indicted, Hank Morris.

The development is the latest in a widening investigation by Cuomo’s office and the Securities and Exchange Commission. At the center of the two-year probe are millions of dollars in payments made by private-equity firms and hedge funds to middlemen known as placement agents who helped the firms win investments from New York state’s pension fund. The firms include District-based Carlyle Group and New York-based Quandrangle, co-founded in 2000 by Steven Rattner, who stepped away from the company in February to lead Obama’s auto industry task force.

(Washington Post, April 23)

Rattner’s Quandrangle private capital group is not the only one to be connected to Hank Morris. The Carlyle Group is under investigation as well. This powerful but secretive corporation has had people like George W. Bush and his old man on the board, as well as Nicolas Sarkozy’s brother Olivier. The irony will not be lost on class-conscious people that Quadrangle’s CEO was simultaneously plotting against UAW pensions while turning New York’s $122 billion pension fund into a criminal enterprise.

Not long after Rattner left the N.Y. Times to launch a career in investment banking, he wrote an article that effectively anticipated the economic trajectory that the American bourgeoisie would follow under Democrat and Republican alike. Like many other leading reporters at the newspaper of record, Rattner had a finely-honed sense of what benefited the ruling class he was now joining as a fledgling member:

The New York Times, May 1, 1983
Report Card on Thatcherism
By Steven Rattner

Steven Rattner, an investment banker, was formerly a Times correspondent in London.

IN the ”Black Country,” the tortured landscape between Birmingham and Wolverhampton that was once at the heart of Britain’s industrial prowess, the sense of industrial desolation is overpowering. Abandoned factories with broken windows stare blindly down the narrow streets. Hulking buildings, where complex metalwork was proudly fabricated for a hundred years, have been reduced to warehouses. The 19th-century canal system still dissects the area, but the water is fetid. Many local craftsmen are unemployed, and some middle-aged workers may never find jobs again.

Yet any assessment of the country’s economic state must take account of an astonishing paradox. Despite the shocks suffered by the economy since Mrs. Thatcher’s election in 1979 – unemployment up from 5 percent to 13.6 percent, manufacturing output, at its lowest point, down by more than 15 percent – the Prime Minister is widely popular in the nation at large. Although her standing has dipped from the peak it reached last summer, after the successful Falkland campaign, a recent poll found that her Conservative Government enjoys the support of 43 percent of the public, compared to 34 percent for the Labor Party and 22 percent for the Social Democratic-Liberal Alliance. Mrs. Thatcher, in fact, may seek to exploit her popularity in an early vote. She need not call a national election for another year, but there is increasing speculation that she will call it for October or perhaps even June. And, in full awareness of the approaching political test, her Chancellor of the Exchequer, Sir Geoffrey Howe, has unveiled a budget for the new fiscal year that makes minimal concessions to those among the voters who have been hurt by the Thatcher policies. In all essential respects, the austerity program has been reaffirmed, without any adverse consequences for the Prime Minister’s popularity.

As should be obvious to anybody who has not drunk the “lesser evil” Kool Aid, Thatcherism was continued by her successors in New Labour and in the Democratic Party in the U.S. A turn toward high technology, financialization and fiscal austerity was just what the doctor ordered when it came to making Anglo-American imperialism competitive in a world that had fully recovered from WWII.

Just 3 years after Rattner had written in praise of Maggie Thatcher, he had become one of Wall Street’s “big swinging dicks”, as Michael Lewis put it in “Liar’s Poker”. He was singled out by his old employer as one of “The Street’s Well-Paid Upstarts” in a March 31, 1986 article so titled:

Since the go-go years of the 1960’s, Wall Street has increasingly become a young person’s game, and it has handsomely rewarded the best players. A number of developments, from the rapid growth of investment banking to the new eminence of the trading desks and the proliferation of new products and markets, have led the Street to hire more and more young men and women and shower them with dollars.

For 30-year-olds who are stars on Wall Street, ”making $250,000 would not be any surprise,” said John Gutfreund, chairman of Phibro-Salomon Inc. That is about double what they would have made five years ago, he added. Other investment bankers say that is the starting point, and that $750,000 is not unknown. As if that were not enough, they tend to marry money. ”The number of two-investment-banker families is high,” said Steven Rattner, a 33-year-old who runs the communications group at Morgan Stanley & Company and is engaged to Maureen White, an investment banker at the First Boston Corporation. Others marry lawyers whom they meet while working on deals.

The boom in investment banking has thus created a small but noticeable class of New Yorkers – self-made 30-year-olds who have more money than they know what to do with, in a city where most young professionals spend money they do not have.

”There isn’t anything I see in a store that I can’t buy,” said James Cramer, a 31-year-old retail broker at Goldman, Sachs & Company.

Well, one of the things that these guys learned that they could buy was politicians. Ten years after Rattner had crawled his way to the top, he had become a power broker in the two-party system. In a Daily News article dated April 17, 1997, we learn that “rich New Yorkers are bucking up pols”. Number one on the list was Bernard Schwartz, head of Loral Space and Communications, who gave $ 661,000, nearly all to Democrats, and enjoys close ties to the Clinton administration. Hedging their bets, Steven Rattner, who was at Lazard Freres at the time, and his wife Maureen White, gave $265,000 to both parties. After all, if you are going to promote Thatcher-style neoliberalism, there are arguments for investing in George W. Bush and Bill Clinton alike. Not to speak of Barack Obama.