Monthly Archives: April 2016
By Pam Martens and Russ Martens: April 1, 2016
According to Forbes, Ken Griffin, CEO and founder of the hedge fund, Citadel, has a net worth of $7.6 billion. But unbeknownst to most Americans, Citadel received a windfall boost from the taxpayers’ pocketbook sometime between September 18 to December 12, 2008. That was during the Wall Street crash when the U.S. government had taken over the big insurer, AIG, and decided to pay 100 cents on the dollar on AIG’s obligations to Wall Street banks and hedge funds.
Did the U.S. government have to pay 100 cents on the dollar when AIG was unable to pay what it owed. Absolutely not. It could have negotiated prudently on behalf of the taxpayer. Instead, it doled out at least $93.2 billion as payment in full to banks and hedge funds, of which Citadel received at least $200 million. We say, at least, because all U.S. taxpayers are allowed to know in this matter by their government is what happened during that brief window of September 18 to December 12, 2008.
When it comes to Citadel, there is plenty more the government won’t tell the public. In 2014 the Securities and Exchange Commission refused our Freedom of Information Act request to learn how the dark pool operated by Citadel functions. What we did learn during our investigation is that Citadel has a history of fines over charges of serious trading violations. Read our in-depth report here.
We also know from media reports that in 2006, two years before Citadel got $200 million of what was effectively a taxpayer bailout, Griffin and his former wife paid $80 million for a Jasper Johns painting titled “False Start.” We also know that as of this past January, courtesy of the Chicago Tribune, Griffin cashed out one of his full-floor condominiums in the Waldorf Astoria in Chicago for $16 million but still owns another full-floor condo there. The newspaper also reveals that Griffin additionally owns: “two full-floor units in the Park Tower [Chicago] — both the 67th floor and the full-floor, 66th-floor unit, which Griffin bought in 2012 for $15 million. He also owns homes in Aspen, Colo., Hawaii and Florida. Topping all of this is his recently reported, $200 million purchase of three full floors of a luxury condo tower under construction at 220 Central Park South in midtown Manhattan.”
Ken Griffin has bounced back nicely from the 2008 crash on Wall Street – unlike millions of other Americans who did not get a bailout and lost the single home they owned to foreclosure and robo-signed fake documents.
One of the reasons that Ken Griffin’s net worth has more than doubled from $3.7 billion in 2008 to today’s $7.6 billion, is that he pays taxes on his hedge fund winnings at a tax rate lower than that paid by plumbers and nurses. The tax dodge is respectably called “carried interest.” Economist Dean Baker has written an understandable article on the topic at Huffington Post, in which he crystallizes the tax dodge as follows:
“Many issues in tax law are complicated; the fund managers’ tax break is not. It’s just a good old-fashioned rip-off of ordinary taxpayers for the benefit of the wealthy. The basic point is very simple. The fund managers’ tax break allows managers of hedge funds, private equity funds, and various other investment funds to have much of their pay taxed at the capital gains tax rate rather than the tax rate applied to wage income.”
How does such a tax ripoff continue in an economy that can’t get out of a subpar two percent or less growth rate and a nation crippled under a $19 trillion debt load, which in no small part results from the 2008 Wall Street crash, bailouts and stimulus packages? When you’re a billionaire, subsidized by the wage-earning taxpayer, you have lots of money to throw around in the world of politics.
According to Mother Jones, Ken Griffin’s name appeared on the 2014 list of the movers and shakers that had private meetings scheduled with the Koch brothers to plot how to make sure the 2014 midterm elections came out to their liking.
And, of course, it also helps to have the quintessential bailout king on your payroll just in case another crisis occurs. Last April, Citadel issued a press release announcing that former Fed Chairman, Ben Bernanke, would move to the payroll of Citadel as an outside Senior Advisor. Bernanke presided over the largest secret bailout of Wall Street and foreign banks in U.S. history, requiring Bloomberg News to fight for years in court to uncover at least some of the truth.
Fortune Magazine had previously reported that Citadel was holding secret meetings with the Federal Reserve during the Wall Street crisis, writing on December 9, 2008 that “Then there was the most damaging rumor of all: Griffin had been holding ‘secret meetings’ with the Federal Reserve, looking for a bailout.”
We wanted to find out just whom it was that Bernanke had met with during the crisis. We filed a Freedom of Information Act request and waited. When we received Bernanke’s daily appointment calendar in 2014, six long years after the peak of the crisis, it was still heavily redacted, with a whopping 84 meetings between January 1, 2007 and the collapse of Bear Stearns on the weekend of March 15-16, 2008 blacked out.
The anger of the American voter, reflected in their antipathy to anything and anyone considered “establishment,” has been fueled in no small part by an increasingly secret government and a one percent class that has been able to keep it that way.