Blackstone big Steve Schwarzman may have gone into hiding but he’s still the talk of the town. Especially if your plot of land in that town—Greenwich, East Hampton, etc—was bought with private equity tax-advantaged dollars.
“Whenever group of private-equity guys gets together nowadays, the conversation inevitably turns to Steve Schwarzman,” the Economist reports today.
“It was all going so well until Schwarzman went over the top,” one will say. “Yeah, why did he have to hire Rod Stewart to sing at his birthday party?” replies another. “And then make quite so much money in the Blackstone IPO? Now everyone hates us, no one wants to lend to us any more, and Congress wants to tax us to hell and back.”
The forces of envy and political rent-extraction had been aiming at private equity for quite some time but there is little doubt that Schwarzman and the Blackstone IPO provided them with a much easier target. It’s always harder to attack abstractions than actual people. One of the Okies of The Grapes of Wrath once asked, “Who can we shoot?” Schwarzman accidentally volunteered his head—or, well, claws—for the rifle scope.
But it’s not just the politicians, labor unions and tax-eaters who have Schwarzman in their scopes. Another special interest group is looking askance at Schwarzman—his own industry. According to the Economist, a popular question among private equity hochos is “Well, what’s Schwarzman going to do to clean up this mess?”
The suggestion of the Economist editors is philanthropy. That’s a popular decision among the super-wealthy but we’re not sure it’s the right one. For starters, we can’t remember a single malefactor of great wealth whose reputation was rescued within his lifetime by charitable donations. Most of those who have made huge donations recently—say, Warren Buffett or Bill Gates—were already hugely popular. Schwarzman is no Buffett.
What’s more, there’s little evidence that huge donations to institutional charities are effective at accomplishing the presumed goals of the charities. Schwarzman may simply be throwing good money after bad if he pumps up the coffers of our giant charity industry. So what’s a down-on-his-luck private equity king, who brags about his own skill as a counter-puncher, to do to rescue his rep?
Saving Steve Schwarzman [Economist.com]