This week the New York Times reports that the Japanese conglomerate SoftBank will buy an American private equity firm, Fortress Investment Group, that oversees $70 billion in assets. Fortress specialises in dealing with ‘distressed assets’ – i.e. assets procured cheaply because of forced sales, bankruptcies or other misfortunes. As the NYT explains, Fortress is “an entity that is regulated – if relatively lightly compared with, say a bank.”
As a result of this purchase, SoftBank will oversee assets under management of $170 billion, “making it one of the largest private investors in the world after the Blackstone Group, which manages about $330 billion”. The paper goes on to explain that while “private equity firms have performed poorly as publicly traded stocks, they are attractive in part because of their ability to lock up money for multiple years and charge high fees.” In other words, they are attractive because like parasites they are able to gouge rent from ‘distressed assets’ over many years.
In the meantime, in another of the global financial system’s galaxies, Stephen A. Schwarzman, chairman of both the Blackstone Group and Donald Trump’s economic advisory team, celebrated his 60th birthday in style. David Koch, the billionaire Republican that funds attacks on Democrats, sat on one side of the birthday boy, and Ivanka Trump sat on his right. The cost was estimated by the New York Times at between $7 million and $9 million. There were camels, gondoliers, fireworks and trapeze artists. Readers will recollect that the Blackstone Group is where Britain’s ex-chancellor of the exchequer, George Osborne MP is now housed as an adviser on a modest fee of £200,000.
The party took place just after Mr. Schwarzman’s firm “had completed its $39 billion purchase of Equity Office Properties in what was the largest leveraged buyout ever.” A leveraged buyout is the purchase of a company with a combination of equity and debt. The purchased company’s future cash flow (rent) is used as collateral to secure and repay the borrowed money. Borrowed money benefits from tax breaks.
These are the Masters of the global financial Universe. They have captured the great public good that is the monetary system and now control it in their own immensely greedy, vested interests. They are able to do so because they have corrupted and ‘captured’ democratically elected politicians. For modest fees, these politicians are prepared to sell out the publicly created, and taxpayer-backed monetary system, and subordinate it to the interests of a tiny, arrogant elite.
All the while, society turns a blind eye, and focuses instead on immigrants.
This post first appeared on Prime Economics