The Met & the Bailout Billionaires

According to figures released by the Bureau of Labor Statistics on Dec. 3, 2010, the national unemployment rate in the U.S. is officially up to 9.8%. “Frugal” seems to be the most used word to describe the current Christmas season. Together with rising home foreclosures, increasing poverty, lack of healthcare, and some 14% of Americans relying on food stamps to meet basic needs, millions of Americans are becoming increasingly desperate. That is why the holiday party mounted at New York’s Metropolitan Museum of Art on December 9, 2010 was such an affront.

The Blackstone Group rented the entire museum for the evening, but it did not invite anyone from the media to attend their 25th annual holiday celebration. However, freelance journalist Kevin Roose managed to get into the event, and his report titled Let Us Eat Cake: Undercover at the Blackstone Holiday Party was published in New York Magazine on Dec. 10, 2010, causing quite a commotion. Roose’s unflattering coverage of the Blackstone soirée told the tale of two Americas, but it also inadvertently brought into question the function and responsibilities of museums; what is their mission, who controls them, and to what end? The Met advertises on its web site that “entertaining at the Metropolitan Museum is a privilege reserved for its Corporate Patrons and eligible non-profit organizations.” That elitist statement is clear enough, but a closer  look at the Blackstone Group and why the Met affords them privileges is instructive.

The Blackstone Group is one of Wall Street’s most formidable private equity companies, with $98.2 billion in assets under its management as of December 2009. Stephen Schwarzman, the Co-founder, CEO, and Chairman of the Blackstone Group, has a net worth of around $8 billion. He arranged the bash at the Met as a celebration of his company having been founded 25 years ago. Schwarzman naturally attended the party, as did Blackstone co-founder Pete Peterson and Blackstone president Hamilton E. James (more on him later). As one of the largest private equity companies in the U.S., Blackstone has played a major role in the current economic crisis.

To prevent the collapse of the capitalist economy the U.S. government under President George W. Bush created TARP, the “Troubled Asset Relief Program,” which began the rescue of mega-corporations that were teetering on financial breakdown. President Obama continued and expanded TARP, which distributed well over $700 billion worth of taxpayer-funded bailouts to banks like Citigroup, Wells Fargo, Bank of America, and many others large and small. TARP money also went to automakers like General Motors and Chrysler. Large insurance companies and “specialty lenders” like American Express, Discover Financial Services, and Citigroup also received massive bailouts from Obama.

The largest insurer to be given TARP money was the American International Group, Inc. (AIG), just one of the corporations Obama deemed “too big to fail.” AIG received a taxpayer-funded bailout of $182.3 billion. When the government announced plans to bailout Wall Street and the banks, Blackstone became one of the financial companies to administer the procedure; in Sept. 2010 Blackstone won the role of financial advisor to AIG, an assignment that has “earned” Blackstone hundreds of millions of dollars in fees. When AIG began selling off tens of billions of its assets in order to raise funds to repay the government, Blackstone took fees for “advising” AIG. In a March 2010 article, Reuters reported that auctions of AIG’s assets have generated “more than half a billion dollars in fees since its near-collapse in Sept. 2008, with every major Wall Street bank getting a piece of the action.”

Here it must be noted that after receiving tens of billions of dollars in the first phase of government bailouts under Bush, AIG continued to dole out major contributions to politicians – including then presidential candidate Barack Obama. Even as the company was imploding during the 2008 presidential campaign, AIG gave candidates more than $630,000, making its second largest contribution to Obama ($130,000). This prompted ABC News to write an article on March 18, 2009, titled, Will Obama, McCain, Dodd Return Contributions from AIG Employees?

The Blackstone Group also benefited from the near failure of Hilton Worldwide. The international chain of luxury hotels recieved a $180 million bailout from the Obama administration, arranged with taxpayer-funded money. Interestingly enough, Hilton Worldwide is owned outright by Blackstone. In Oct. 2010, thousands of hotel workers in three U.S. cities staged a week-long strike against Hilton to protest the company’s increase in work loads and cuts in worker’s benefits, at the very moment Blackstone was walking away with $180 million in federal bailout money. There are other examples of the Blackstone Group profiting from the economic collapse, but they are too numerous to list here.

Aside from it current role in bailing out Wall Street and the banks, Blackstone has been involved in a number of other operations. In 2010 it spent $4,635,875 on lobbying. It maintains close ties with Kissinger Associates, Inc., the “international consulting firm” owned and managed by Henry Kissinger. During the outrageous 2001 Enron corruption scandal, Blackstone was the financial advisor to the corporate giant (at the time worth over $100 billion), helping Enron to “restructure.” In June 2010, Business Insider reported that BP hired the Blackstone Group to help defer a hostile takeover by rival oil companies in the wake of BP’s Gulf of Mexico oil disaster.

As if all of the above was not enough to forever sully the reputation of the Blackstone Group, Schwarzman, CEO of the corporation, referred to President Obama’s plans to raise taxes on the private equity industry in the following manner: “It’s war. It’s like when Hitler invaded Poland in 1939.” Mr. Schwarzman did not explain how the genocide of 3 million Polish Jews was comparable to large companies having to pay higher taxes. Mr. Schwarzman’s enmity towards Obama should come as no surprise. While Blackstone as a company put its money on candidate Obama – as an individual Schwarzman raised $100,000 for George W. Bush in the 2004 presidential campaign.

I have no idea what Stephen Schwarzman and the Blackstone Group paid for the privilege of holding their bacchanalia at the Metropolitan Museum of Art, but you can assume it cost plenty. Considering Blackstone’s track record, the Met should not have accepted a single dime from them, but the controversy does not stop with the Met hosting a party for the billionaire boys club.

On Sept. 14, 2010, it was announced that Hamilton E. James, the president of the Blackstone Group, had been elected to the Board of Trustees of the Metropolitan Museum of Art.