US How Bubble Barons Protected Their Influence While the Economy Tanked

How Bubble Barons Protected Their Influence While the Economy Tanked
By Kevin Connor, AlterNet
Posted on April 16, 2010, Printed on April 16, 2010
http://www.alternet.org/story/146462/

Following the deadly mine explosion in West Virginia last week, the
CEO of the company that owned the mine quickly emerged as a sort of
Dickensian villain in media reports. Massey Energy CEO Don
Blankenship´s cavalier, profit-obsessed approach to mining had led
him to dismiss pressing safety concerns at his mines. He had called
safety regulators "as silly as global warming" and ordered managers
to spend more time "running coal" and less time building ventilation
structures. One miner told ABC news that working for Blankenship was "like
living under a hammer. It's about the bottom line; we all know that."

Blankenship was the hammer, but whose bottom line was he looking out for,
exactly? The answer is somewhat surprising.

One of the handful of major investors in the coal company is Stanley
Druckenmiller, a billionaire hedge fund manager researched as part of last
month´s AlterNet/LittleSis.org investigation of the bubble barons.
Druckenmiller sits on the board of the Environmental Defense Fund (EDF),
an organization that would seem to be opposed to Massey´s exploits. He
apparently saw the company´s abysmal safety record as no cause for concern
before throwing roughly $200 million at the company, one of his biggest
investments as of December 2009. And he was not put off by the company´s
controversial environmental practices - Massey is a leading practitioner
of mountaintop removal mining, and Blankenship a leader in the climate
change denial movement.

Massey Energy CEO Don Blankenship and bubble baron Stan
Druckenmiller.

The 300 citizen journalists who joined our investigation of the
bubble barons - elite billionaires like Druckenmiller who saw
astronomic gains in wealth over the housing bubble years - made over 1,200
of these kinds of connections, linking the wealthy billionaires to
politicians, foundations, families and businesses, and collectively
mapping a network that controls hundreds of billions of dollars in
capital. In doing so, they parted the corporate veils that distance the
barons from the business activities that enrich them, discovered the odd
philanthropic habits they share, and developed an illuminating picture of
the strange world they inhabit.

It was not an easy task. Billions of dollars translates into numerous
investments, donations, board seats and "friends," and lots of not
entirely glamorous research is necessary to dig up the most telling
connections. LittleSis analyst seanhartnett took the prize as the most
prolific investigator, researching David Rubenstein, Donald Bren, and
several other bubble barons, but many other citizen journalists
contributed substantially to the investigation.

What follows is a selection of findings that came out of these
efforts. In some sense, the project will not end as long as the
bubble barons rule our economy; there will always be more to dig up, and
they deserve sustained scrutiny. But we´re off to a good start.

The underwater economy

If you have visited the Mall of America in Minnesota you may have
come across the Underwater Adventures Aquarium, located underneath
the mall. The aquarium is owned by Merlin Entertainment, an amusement park
company that was purchased by the Blackstone Group in 2005. Blackstone is
the private equity firm founded by bubble barons Stephen Schwarzman and
Pete Peterson.

Dan, the citizen journalist who investigated Schwarzman, has been to the
Underwater Adventures Aquarium. "It costs $19 for adults, $12.49 for
kids," he wrote in an email. "I literally went through it in 15 minutes.
It´s cool, but it basically consists of one giant tank, that you go on a
moving belt around."

Dan was particularly interested in Underwater Adventures because a
friend of his works as Sharky, the aquarium´s mascot. Working as
Sharky entails wearing a 15-pound shark costume and walking around
the Mall of America passing out discount coupons to families in order to
get them to visit the aquarium.

Sharky makes $8 an hour. Some days, if enough of the coupons he
passes out lure families to Underwater Adventures, he makes a
commission.

Schwarzman and Underwater Adventures' Sharky.

Schwarzman sees tremendous value in amusements like Underwater.
"There´s usually room in the theme parks business for efficiencies on the
cost side," he told Reuters last year. Blackstone has found cost
efficiencies in the compensation structure of the sales department at
Underwater Adventures: coupon targets are now higher than they were before
Blackstone/Merlin purchased it, effectively making it harder to win
commissions for sending kids in the mall to the aquarium.

This is the underwater economy. People (and companies) get loaded up with
debt - credit cards, mortgages, car loans - so that they have money to
spend on $19 for a conveyor belt trip around an aquarium (plus $25 for
their two kids). Then they turn around and get paid wages of $8 an hour to
put on a shark costume and try to attract families to an overpriced
amusement. The bubble barons stay afloat and thriving, of course. Stephen
Schwarzman, for one, can pay Rod Stewart $1 million in Sharky profit to
play for half an hour at his birthday party.

--snip--