This post was guest authored by Madeleine Johnsson.
Time may be up for Donald Trump in the White House, but his most ardent supporter on Wall Street is not going away. Stephen Schwarzman, the private equity billionaire, stood by the former President, even after the deadly Jan. 6 insurrection. And, as the third-largest individual backer to the lawmakers who sought to overturn the U.S. election results, the CEO and co-founder of Blackstone stands out for his role in undermining American democracy for the sake of enlarging his already enormous personal fortune.
The top political donor on Wall Street, Stephen Schwarzman funneled $33.5 million into conservative Super PACs in the 2020 election cycle. According to the Center for Responsive Politics, $3 million went to Trump through his America First Action PAC, while $15 million went to re-elect former Senators David Perdue and Kelly Loeffler through Senator Mitch McConnel’s Senate Leadership Fund.
Schwarzman’s allegiance to the former President paid off. His appointment as advisor to Trump brought him business opportunities and access to world leaders. Blackstone accrued a promised $20 billion investment from Crown Prince Mohammed bin Salman of Saudi Arabia, an arrangement worth $100 million in annual fees for Blackstone. Trump regulators eased regulations on private equity, allowing private equity managers to take ever larger risks with others’ lives and livelihoods.
Trump’s tax bill preserved the widely condemned “carried interest” loophole, which allows private equity executives like Schwarzman to misclassify their salaries as capital gains, which are subject to a lower tax rate. This loophole allows the world’s richest (largely white) men to pay a lower tax rate than teachers, firefighters, and nurses. Schwarzman is perhaps its biggest beneficiary: the carried interest loophole brings in $100 million for Schwarzman each year. Trump’s departure could pave the way for the passage of the Carried Interest Fairness Act, sponsored by Rep. Bill Pascrell of New Jersey, which would finally do away with the loophole.
Loyal to Trump
Friends of Schwarzman flattered him with the notion that he provided “adult supervision to the maniac,” but the truth is darker. Schwarzman liked what the proximity to power got him. “In life, you’ll often find that having influence and providing sound advice is a good thing, even if it attracts criticism or requires some sacrifice,” Schwarzman told a group of students. And that sacrifice would appear to be American democracy.
Following Biden’s victory on Nov. 7, Schwarzman contested the election results on a phone call with 24 Fortune 500 CEOs, citing skepticism over results in Pennsylvania. Multiple participants feared a coup d’état, which Schwarzman blithely dismissed. After the violent assault on the Capitol, Schwarzman denounced the mob attack in a statement as “an affront to the democratic values we hold dear,” but stopped short of directly criticizing Trump.
To understand what Stephen Schwarzman wants to do with American politics, just look at what he’s done to America with his company. Blackstone is the giant of private equity, a lucrative industry that claims to rehabilitate companies but looks a lot like outright extraction. Private equity firms use leveraged buyouts to saddle companies with unsustainable debt, forcing them to fire employees and sell assets to cover the bill.
Recessions, however bad for ordinary people, are boon times for private equity. “The real golden age comes when you have a mess,” Schwarzman once said. “You have economies that are on their back.” During the Great Recession, Blackstone’s subsidiary Invitation Homes snapped up scores of homes on the cheap to convert into overpriced rental units while Black families were losing their homes in record numbers. To this day, Black household wealth has not recovered, and Invitation Homes has been the nation’s largest single-family rental landlord since 2017. (Blackstone cashed out in 2019.)
Only Money Matters
For a man born on Valentine’s day, his heart is nowhere to be found. Schwarzman’s business philosophy embodies Gordan Gekko’s “greed is good.” He infamously compared President Obama’s proposed elimination of the carried interest loophole to the Nazi invasion of Poland and called a fellow businessman who supported the tax increase “a traitor.” And he once told of his pursuit to “inflict pain” and “kill off” his rivals on Wall Street. No less than his mother, Arline Schwarzman, said it: “Money is the measuring stick.” Perhaps that’s why he jokes that “Donald listens to me because I’m richer than Donald.” Ever mindful of his own greatness, Schwarzman throws himself multimillion dollar birthday parties, complete with big portraits of himself.
Reforming Private Equity
Stephen Schwarzman predicted in 2015 that Trump would be “good for democracy,” a sign of either willful denial or extremely bad judgment. Long after it was clear Trump was a menace to democracy, Schwarzman stuck with him. Fueled by the billions that flowed to him through Blackstone’s predatory business model, Schwarzman was willing to finance the assault by Trump and his sycophants on democracy itself, all for the sake of ever-greater riches.
Far-reaching private equity reform could restrict Schwarzman’s ability to strip the political system of democracy for profit. Passing the Stop Wall Street Looting Act to close the carried interest loophole, end private equity’s debt-driven playbook, and hold executives like Schwarzman accountable for their abusive practices would be a start.