with Dennis J Bernstein
Dennis J. Bernstein: It looks like Big Don is in trouble, but now the billionaires are turning their attention to Congress. They’re going to need to buy Congress and the Senate for a number of reasons. And that’s what we’re going to talk about today. Let’s start with carried interest. What’s that?
Greg Palast: Carried interest. Where do you carry your interest?
DB: I don’t have any.
Palast: What are you interested in? Carried interest is simply known as the billionaires’ hedge fund loophole. It’s really complex, but it has to do with the rate at which hedge fund guys pay taxes – or don’t pay taxes. If you and I go to work and get some pay, we pay according to a schedule on the tax code. If you go to work as a hedge fund speculator and you make money, like billions, then you don’t pay by the normal schedule. You pay at a reduced schedule, almost cut in half. That is how Romney ended up only paying 14% tax because he uses this loophole called carried interest.
Now, interestingly, there’s two guys who really agreed that this is an egregious, horrible, ridiculous loophole. One was named Bernie Sanders – remember him? He’s quickly becoming a trivia question. He said if I’m president, we’re going to close this loophole. Now, understand why that makes billionaires unhappy. Hedge fund managers now save about $17 billion a year, so it’s about $170 billion over ten years – that’s a fifth of a trillion for those of you who made it through No Child Behind Left education. They don’t want to lose that fifth of a trillion. It’s your money, I know it should go to the government treasury, but hey,
Bernie wanted to slice it out. The other guy that wanted to slice it out, oddly, is a guy named Donald – The Donald. Mr. Trump wanted to close the carried interest loophole. Why? Because he’s cranky. He’s one of the few supposed billionaires – he says he’s a billionaire – one of the few billionaires on the planet who doesn’t use the carried interest loophole. It’s reserved for Wall Street speculators and he builds casinos. He doesn’t speculate. He has said these guys are nothing but gamblers, they don’t create a single job, they make billions of dollars if they’re lucky, and then we give them a tax break for being lucky on their gambling. So he says he wanted to close the loophole.
Then something very interesting happened. One of the richest speculators on Wall Street, who we talked about before, named John Paulson, the foreclosure king – all his money is from gambling, if not fixing the casino known as Wall Street – he has become the number one top donor for The Donald. Now why would a guy who would get clonged by closing this loophole support The Donald? Let me tell you. Paulson, on just one single hit that he made on the mortgage market, saved $1.2 billion. In other words, $1.2 billion which we the people didn’t get because he used this special tax loophole on a single deal. He had another deal where he and another big Republican donor, Paul “The Vulture” Singer, made a $1 billion savings on this loophole. So why would Paulson support Trump? Trump just repeated in his Economic Club speech that he was going to close this loophole. Why aren’t the billionaires screaming? Why is Paulson still backing Trump?
The answer is, yes, he’s closing the carried interest loophole, but he’s opening up another bigger loophole. Understand, Paulson, he made $5 billion in a year and instead of paying 40% Federal Tax on it, which is his bracket, he paid only 23%. But that loophole is closing if we have a President Trump. Instead he’s going to let Paulson use a different loophole in which he would only be taxed 15%. So, in other words, Paulson’s taxes are going to go down even further under Trump. And the way Trump wants to rewrite the loophole, Trump himself would now get a piece of the action. He don’t like being left out, so it’s a new loophole.
Hillary Clinton, by the way, has said that if she becomes president she’ll close carried interest. She was debating Senator Sanders and whatever he would say when she was losing, she would say the magic words “Me too, me too! If I’m president, me too! I’ll close carried interest.” Obama said he was going to close that loophole, and he never even proposed it. Because, again, he gets money from these same hedge fund managers. In fact, Hillary Clinton is getting more money from hedge fund managers than Donald Trump. I’m not saying that she won’t live up to her promises that she made during the Primary with Senator Sanders. I don’t want anyone to accuse me of saying that she was just making an empty campaign promise.
DB: But Trump is in trouble. Are the billionaires taking steps to go around Trump in case they don’t get their man?
Palast: Well, the second biggest gainer from the carried interest loophole, a guy who’s got at least $1 billion chopped off his taxes with the carried interest loophole, he ain’t messing around throwing his money on Trump, because he doesn’t speculate. Paul “The Vulture” Singer is the number one donor to the Republican party – not the Kochs, Paul Singer. He won’t give a dime to Trump. He thinks that’s a loser. He is instead putting all his money into those swing Senate races, into the Kirk race in Illinois, he’s backing Kelly Ayotte in New Hampshire, Portman in Ohio. These are the races he’s going after. He wants to make sure that the Republican Senate stays the Republican Senate. Then it doesn’t matter what the President proposes or which blonde gets elected, as long as the Senate is there that tax loophole will not be closed.
And, by the way, let me mention the Kochs. They don’t give their money directly to the Republican Party just for that reason. They don’t want Trump to get his short fingers on that money. They have actually already arranged for $160 million in television and radio broadcasts for the last month, for the October lead up to the election. $160 million that they have reserved and they paid for. Their whole intent – every penny that they’re putting in – is to keep a Republican Congress.
For example, Trump has gotten so unpopular in Illinois that Singer is paying for Senator Kirk, who is the Republican Senator for Illinois, to run anti-Trump ads so he can appear to be the Democrat, he can appear to be Hillary Clinton’s running mate. This is an old Chicago trick, you appear to be a party that you aren’t. I’m not making this up. He’s trying to run as a kind of Democrat for re-election. Kelly Ayotte has said that she will vote for Trump but not endorse him, whatever that means.
DB: There are other reasons why these guys want to buy Congress. Argentina and Puerto Rico. Where does that come in and why does that have all the billionaires throwing their money at Congress?
Palast: Well, as I said, Paul “The Vulture” Singer is the vulture, but there are many vulture financiers, as they are called. That’s a term given to them in the finance industry, including John Paulson, the Trump backer. While they don’t agree on Trump, they do agree on the Senate. And one of their other big issues is their right to conduct vulture attacks on nations and banks.
They take nations that are dying, literally, like the Congo, like Argentina when Argentina was in trouble, and now Puerto Rico. Paulson is now one of the big holders of Puerto Rico’s old bonds. What they’re doing is they’re squeezing the hell out of these nations. For bond purposes, Puerto Rico’s not America. When an American state or an American city runs into financial trouble, it has the right to go to Bankruptcy Court. Puerto Rico specifically is excluded from that American state and city right. And these are Americans remember.
Puerto is dying, it’s bleeding to death because its population is leaving. As the treasury shrinks and the population shrinks, they’re laying off school teachers, people aren’t getting paid. Paulson sees this as an opportunity. Vultures feast when things die, and Puerto Rico is dying. So Paulson wants to make sure that Congress does not allow Puerto Rico to straighten out its debts in Bankruptcy Court. That’s one of his biggest issues. He got Marco Rubio on his side – that’s another tight Senate race so he and Singer are backing Rubio in that really tight Florida race. Paulson and The Vulture are, again, backing these Republican candidates in tight Senate races.
By the way, Rubio, when he was trying to get votes from Puerto Ricans who had moved to Florida, had called for giving Puerto Rico bankruptcy protection. It was bipartisan. Then Singer came in with his cash, Paulson came in with his cash, and suddenly Rubio has literally flipped around to get their cash. Their cash is more important than the people’s votes. You see it right there immediately. It couldn’t be more stark.
DB: We see Venezuela being junked, if you will. I guess the vultures are watching that in the context of U.S. policy. Should we be looking at that?
Palast: Absolutely. I’ve covered Venezuela a lot. I was close to Hugo Chavez, I know the current president. There’s no way that the Chavista Party is going to survive another election. Things have gone bad as the price of oil has gone down. One of the great things that Hugo Chavez did was to spread the oil wealth to the public, which had never happened before He spread it around but unfortunately, with oil prices absolutely crushed, the oil companies go to Venezuela last, they’re always last on the list. With Venezuela crushed, there’s no money to maintain the social programs that Hugo Chavez had started, so people are upset.
Remember, a lot of young people are now voters and they don’t remember the old days before the Chavistas took over. They don’t remember when Venezuela was basically an oil colony. So the vultures will be happy when Venezuela dies, that’s when vultures feast. But they’re going to need the backing of the United States government, and the Democrats are saying that they’re going to put the vultures out of business. Whether we believe them, I don’t know. But certainly the vultures are scared enough of the American Eagle suddenly coming after them that they need to buy the U.S. Congress.
DB: And Dodd-Frank, while some people think it wasn’t nearly strong enough, to them it’s the enemy. Much more than Obamacare, Dodd-Frank is the thing that gets on everybody’s nerves. Do you want to talk about how much money you think they’re going to spend to kill that?
Palast: The vultures are involved in that too. Understand, when banks die, just like nations or people, vultures feast. Now Dodd-Frank is weak, it didn’t put back Glass-Steagall or end the turning of Wall Street into a casino, but it now says if banks blow all your money in one of their Vegas operations, they have to have what’s called a “living will.” Basically they can’t die, they would be merged into other banks, or saved before you have to bail them out. That absolutely enrages the vultures. They need the banks to die so that they can grab their assets and then demand a big piece of bailout pie. That’s how Singer made money in the auto bailout, and in the bank bailout as well.
If there’s a crisis, they want banks to die. They don’t want the banking system saved. They want to wait, they want to force Americans to pay bailout loot. You’d think that’s crazy, who would vote for that? Well, the guys that take their money is the answer. The Senators who take their money will vote to allow the vultures to eat the corpse of the banks when we stuff them with dollars.
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Greg Palast (Rolling Stone, Guardian, BBC) is the author of The New York Times bestseller, The Best Democracy Money Can Buy and Billionaires & Ballot Bandits, which will be released as a feature documentary movie this fall.
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Dennis J. Bernstein is the executive producer of Flashpoints, syndicated on Pacifica Radio, and is the recipient of a 2015 Pillar Award for his work as a journalist whistleblower. He is most recently the author of Special Ed: Voices from a Hidden Classroom.