Senator Schumer and the Corruption Culture

By Jackie Corr
Counter Punch
Mar. 18, 2007

The other day, back in the business pages of the New York Times, I read that a big name Democrat thinks the hedge funds are stiffing the K. Street lobbying industry and the D.C. culture of corruption

It seems there is some displeasure in the Beltway among seasoned corrupters over the fact that hedge funders have not been paying a fair share when it comes to supporting the corruption culture in the Congress.

In response to this reluctance to participate and pay by the hedge funders, Charles "Chuck" Schumer of New York has been passing the word to the hedge guys who seem to think reaping the benefits bestowed on them by K. Street beholden senators and representatives comes without charge..

So in January, Chuck, as noted in the article in the Times by Jenney Anderson, invited a few of the real big cigars from the hedge fund industry to dinner at Bottega del Vino on the Upper East Side of Manhattan. From reports online, the Bottega sounds like a place that would be familiar to K. Street regulars.

The New York Post's restaurant critic Steve Cuozzo visited the place a while ago explaining Bottega del Vino is "apparently Italian for empty your wallet's entire contents."

Of course, Schumer is a Democrat, but his real allegiance is to who has the most money, always has been, and so he wasn't worried about picking up the tab.

FOUR BIG CIGARS

How about this for an ethics lesson?

Now as incredible as it may seem, the New York Times cites an unnamed source who identifies four of the big cigars who dined with the senior United States Senator from New York, a senator who is a ranking member of the Democratic Leadership Council, who sits on the Senate Finance Committee as well as the Committee on Banking, Housing, and Urban Affairs.

Not only that, Schumer's long time political allies include Bill and Hillary Clinton, former Treasury secretary Robert Rubin, current Treasury chief Henry Paulson as well as Democratic strategist James Carville and Senator Joseph Lieberman.

According to the Times:

More than $100 billion worth of wealth sat around the table, including Paul Tudor Jones of Tudor Capital; Steven Cohen of SAC Capital; Stanley Druckenmiller of Duquesne Capital; and James Chanos of Kynikos Capital, according to a person who was briefed on the dinner.

So who are these four big cigars?

1. Steven A. Cohen, SAC Capital.

Forbes (Sept. 2006) says Steve Cohen, net worth of around $3 billion, is the 85th richest person in America With an equity of $10 billion the Wall Street Journal calls Cohen "the hedge fund king. His take home pay last year was $350 million and he has also recently purchased a Picasso and Van Gogh for his world class art collection..Cohen lives in Greenwich Connecticut

2. Paul Tudor Jones, Tudor Capital.

Forbes (Sept. 2006) says this Jones is the 117th richest person in the world and still climbing, worth an estimated $2.5 billion at present. Tudor Jones had a big year in 2005 ($500 million) and didn't do bad in 2006, ($300 million.) Jones lives in Greenwich Connecticut.

3. Stanley Druckenmiller, Duquesne Capital Management

Forbes says Stanley is the 428th richest person in the world with a estimated current net worth of around $1.8 billion. Druckenmiller would probably be ranked a lot higher but he took huge losses when the in the dot.com, telecom smash up a few years ago. Druckenmiller lives in New York City.

4. James Chanos, Kynikos Capital.

Chanos is ranked by Forbes as the 428th richest person in the world. He was an early short seller of Enron as 2001 and did very well in the $100 billion meltdown Chanos lives in New York City.

Now we don't know exactly what was said at dinner, and the participants when contacted, would not comment. But as the Times said, the hedge funders wish is to "avoid stringent regulation and a healthy sense of competition."

As for Schumer, his wishes are simple. The senator wants the hedge funders to be more involved in the lobbying process for as we all know, the culture of corruption doesn't run on air. And the hedge fund easy riders have lots of money, maybe more money then anybody else in the world. They manage an estimated $1.4 trillion in assets.

As the Times put it: "For an industry drenched in money... hedge funds have spent a pittance on winning over Washington.".

And the there is that threat of "stringent regulation." At present, the hedge fund business is pretty well free to do what it wants. Again, according to the New York Times: "A decidedly antiregulation environment in Washington has helped the industry."

So one might guess Chuck told the hedge fund high rollers that a friendly regulatory climate could change, especially with the wild-eyed populists in the House of Representatives.

I would also think Schumer made sure they understood the Senate Finance Committee has a history of being quite sympathetic to their class of people, a class that has already been fabulously enriched by the Bush tax cuts.

The bottom line according to Schumer

Reform legislation has a habit of dying once the Senate Finance Committee gets its hands on it. As is well known in the Beltway, the United States Senate Finance Committee has long been a loyal gatekeeper for America's wealthy.

My guess is the Big Cigars at dinner got that message from Senator Schumer.

And with reform regulation often comes fair and equitable taxation. Which is why 8,282 out of the total of 9,800 hedge funds operating in 2006 were registered in the Cayman Islands. And for good reason.

According to a Cayman Island government website: "Cayman provides hedge funds with a no-tax jurisdiction, a sophisticated financial infrastructure that includes major banks and accounting firms, and therefore the ability to achieve measurable savings, which are then passed along to investors. As a result, Cayman has quickly developed as the pre-eminent jurisdiction for the offshore alternative investment industry."

Apparently it isn't cricket to call it the hedge fund racket down there. So they come up with "the offshore alternative investment industry."

But whatever we cakk it, what we have is a pretty good deal for a racket that contributes nothing to society anywhere it operates on the globe..

As for the Americans that Senator Charles Schumer is supposed to be representing, the real bottom line is hedge funds create no jobs, no services, no products and are a drain on the nation's manufacturing infrastructure as well as American education and health care.

Jackie Corr lives in Butte, Montana. He can be reached at: [email protected]