Blackstone and Capital’s Scam


That is the ultimate refutation to the unbelievably brazen campaign

being run by Wall Street hucksters and the knee-jerk oppositionists to law and order at the U.S. Chamber of Commerce.

Blackstone is the giant private equity firm that, ironically, has just gone public (at least in part). Private equity firms are making headlines for making zillions of dollars buying publicly traded firms and taking them private (and later selling them again on public stock exchanges).

The Wall Street-Chamber campaign alleges that the U.S. financial services sector is facing a competitiveness crisis, due to regulation, litigation and prosecution.

Yes, really.

Here’s the Chamber’s CEO Tom Donohue, commenting as the House Committee on Financial Services met yesterday to discuss the role of the Securities Exchange Commission in protecting investors and overseeing the capital markets: “A broken securities class action lawsuit system and an unpredictable and inefficient regulatory system have created a drag on the competitiveness of our capital markets,” said Donohue.

Go ahead and wipe away the crocodile tears.

You have to work mighty hard to muster sympathy for Wall Street. Leave aside the very trivial role played by Wall Street firms in supporting actual investment and innovation. Concede for a moment the questionable premise that Wall Street firms provide a genuinely important social function in facilitating development of the real economy. Forget about the massive financial frauds perpetrated by Wall Street and corporate CEOs over the last decade.

Just consider the profits and earnings for those who make their living on Wall Street. The guys in the fancy suits are doing alright for themselves.

Wall Street bonuses totaled $23.9 billion in 2006, according to the New York State comptroller, up 17 percent over 2005. It takes top Wall Street traders about two hours to make as much as the median U.S. household earns in a year, notes Sam Pizzigati, editor of the on-line newsletter Too Much.

Profits at Citigroup actually fell in 2006 — and the company was still the third most profitable publicly traded corporation in the United States, according to Fortune. Bank of America saw profits soar by 28 percent to $21.1 billion, to register the fourth highest profitability in the United States. J.P. Morgan came in ninth. Profits at Goldman Sachs were up 90 percent, to $9.5 billion — good for sixteenth on the Fortune list.

And then there’s Blackstone. In selling part of itself on the publicly traded markets, the firm was forced to disclose important financial information. CEO Steve Schwarzman made $400 million in 2006. He grabbed $677 million when the company became publicly traded. And his share in the company is valued at $7.7 billion.

The phantasmagoria peddled by various blue-ribbon commissions anointed by Wall Street and the Chamber disregards these riches and concentrates on one overriding deception: The claim that regulation and litigation is driving companies to float their Initial Public Offerings (IPOs, the moment when they initially sell their stock) on foreign markets.

There has been some diversification of IPOs, but it mostly reflects the fact that stock markets in other countries are rapidly developing, and companies in those countries are choosing to list on their home country exchanges.

Once you take that into account, plus the role of a London-based market in attracting small-firm IPOs, it turns out there in fact has not been a shift of IPOs to other national markets. A devastating January 2007 White Paper from Ernst & Young looking at every IPO in the first half of 2006 found that 90 percent were conducted in the launching company’s home country. Of the remaining 10 percent, only a few were “in play” — most went to regional markets, or were small-caps that went to the London Alternative Investment Market. Of the IPOs in play — a grand total of 17 for the first six months of 2006 — about two-thirds were listed on U.S. exchanges.

And then there’s this: Blackstone, the cutting edge of high-fallutin’ finance, chose to do its own IPO on the New York Stock Exchange. And it did quite nicely for itself.

There actually is a looming crisis on Wall Street, but it is the opposite of what the Street’s elite claim. The last five years has seen the rapid evolution of esoteric financial instruments that are subject to almost no regulation or even disclosure requirements. Private equity deals depend on massive amounts of debt; hedge funds too are placing massive bets using borrowed money; and debt itself is being traded like a commodity as never before. The assurance from Wall Street is: don’t worry; only sophisticated players are involved in these deals, they know what they are doing, and they can afford to absorb losses.

But those same sophisticated players were badly burned by the Enron, WorldCom and related frauds of the nineties’ stock market bubble. These characters can apparently be defrauded without too much difficulty. Far more importantly, they regularly suspend their good judgment in pursuit of fads — which means lots of institutional players make the same mistakes at the same time.

It’s reasonable to ask, so what? If the rich get soaked, that’s their problem.

But the institutional players bought into Wall Street’s financial exotica are investing regular people’s pension and retirement monies, so lots of people stand to get hurt.

Even more importantly, the scope of debt-heavy bets now being placed on Wall Street are so huge that the market movers and shakers are doing more than gambling with their own money — they are placing the health of the entire financial system at risk. That raises the prospect of huge potential taxpayer bailouts, or financial crises with impacts on the real economy that are too large to be averted by government action.

For their own good, but more crucially for the good of the rest of us, what Wall Street and the global financial system need is much more regulation, prosecution and stricter liability rules. Things are moving far too fast, with far too little acknowledgement of risk, and far too little oversight or disclosure.

SiCKO, Part II: Things Can Be Different

There are no talking head experts in Michael Moore’s masterful new film, SiCKO.

The first part of SiCKO features regular people detailing the horrors of the U.S. healthcare system, based on their own experience.

But more is needed than just a searing indictment of the present system. How to convey the idea that there is an alternative to the U.S. status quo?

Moore’s answer is to go to places that do have national health plans, and ask regular people there to talk about their experiences.

Moore follows a young American woman as she crosses north over the U.S.-Canada border and seeks to obtain healthcare under the guise of being married to a Canadian. (About which Moore says, “We’re Americans. We go into other countries when we need to. It’s tricky, but it’s allowed.)

This opens the door for an encounter with the Canadian single-payer health insurance system, where treatment is free for everyone and people can choose any doctor they like. Moore interviews everyday Canadians who express bewilderment at the U.S. system of charging sick people for care, and who indicate deep satisfaction with their system.

One man recounts enduring a serious injury on vacation in Florida, and needing to come back to Canada to get care, where treatment was free. “Why should other Canadians pay for your problem?” Moore asks of the man, who identifies himself as a Conservative Party member. “Because we’d do it for them,” comes the reply.

This becomes in many ways the crucial message of SiCKO.

From Canada, Moore travels to the United Kingdom, which has a national health plan, where doctors and healthcare workers are employed by the National Health Service. Patients in a hospital laugh out loud at Moore when he asks them where they pay. When he finally finds a cashier’s office, it turns out that the cashier actually makes rather than takes payments — travel reimbursements for low-income persons.

Moore interviews a handsome young doctor, who explains that although he is on the government payroll, he is doing quite well, thank you. He shows off his fancy car and million-dollar home. And he reports that doctors are paid more if they can demonstrate good results — for example, convincing patients not to smoke.

Next is France, where Alexi, a French-born 35-year-old who had lived in the United States from the age of 18, explained that he moved back to France when diagnosed with a tumor. He received free treatment, and then three months of fully paid time off to recover.

Seeking “the real story,” Moore dines with a group of Americans living in France. They explain not only that they get free healthcare, but that they benefit from mandatory extended vacation time, lengthy paid parental leave, and government-provided nannies for new parents (two times, four hours a week for a family subsequently visited).

U.S. health insurance industry front groups and corporate-backed libertarian think tanks are attacking SiCKO for an overly positive portrayal of overseas health plans. There is a small amount of truth to this. SiCKO does not discuss the shortcomings in these health systems, and they are not trivial. No system is perfect. And there are worsening problems especially in the Canadian and UK health systems, thanks to chronic underfunding and efforts to chip away at the integrity of the system by exactly the same forces that then point to their shortcomings.

Nonetheless, by any serious measure, these systems do far better than the United States. They provide universal coverage, with no fees. These countries’ health indicators are better, evidenced by everything from infant mortality rates to length of life (even though the United States is richer). They are also far more cost effective. More on these policy matters in my next column.

SiCKO ends by going to Cuba. Moore first takes 9/11 rescue workers who are suffering serious ailments but have not been able to get coverage, and some others in need of care, to Guantanamo (where the military has bragged that prisoners are receiving top-notch care). Rejected there, they venture into the Cuban health system.

What appears to have begun as a gimmick turns out to be incredibly moving, as the 9/11 rescue workers and the others are emotionally overcome as they find themselves in a system that doesn’t ask about their ability to pay, or tailor care based on their insurance coverage. The Cuban doctors and health workers are generous, courteous and respectful, and they treat the patients for the ailments presented, full stop. They brush aside proffers of thanks — their job is to treat the sick, after all.

The point of the visit to Cuba is not to celebrate the accomplishments of the Cuban healthcare system — which are extraordinary (Cuba has roughly the same health indicators as the United States, which is not only far richer, but adjusted for currency differences, spends 23 times more per person on healthcare than Cuba, according to the UN) — but to say, “Hey, if this poor country can provide healthcare to all, why can’t the rich power to the North.”

From the care provided in Havana and in a touching scene at a Havana fire station, an even more profound lesson emerges: the power of a cultural commitment to care for one another. All of us for all of us, with as big an “us” as possible.

SiCKO is not an anti-American film, though much of the right-wing chatter says otherwise.

People in the United States do routinely pitch in for one another on a voluntary basis, Moore emphasizes. The problem is that the U.S. corporate health insurance system, the corporate-dominated economy more generally, and the ideology that undergirds both, seeks to defeat the essential insurance function of sharing risk — of everyone helping to take care of everyone else.

Moore offers this challenge, or plea: “If there is a better way to treat the sick … simply by being good to each other … why can’t we do that?”

People in the other countries visited in the film “live in a world of we, not me,” says Moore.

To varying degrees, they have created solidarity societies, and they are happier, and healthier, for it.

SiCKO, Part I: The Human Tragedy

When word got out that Michael Moore was working on a movie with the working title SiCKO, about the U.S. healthcare industry, the industry went bananas.

Memos started shooting around, warning insurance and drug company executives and representatives to keep looking over their shoulders, to make sure they avoided being ambushed by Moore and a camera crew. Indeed, they had something to fear, for they have a great deal of needless misery and suffering to answer for.

But it turns out that Moore didn’t need them after all.

Instead, he’s made a movie driven by heart-breaking story after heart-breaking story. SiCKO presents a devastating indictment of the U.S. healthcare system by letting victimized patients speak for themselves.

When Moore announced on his web page that he was doing a movie about outrages in the U.S. healthcare system and was looking for examples, he was flooded with 25,000 responses.

He profiles Dawnelle, whose 18-month-old daughter Michelle died because her health plan, Kaiser, insisted Michelle not be treated at the hospital to which an ambulance had taken her, but instead be transferred to a Kaiser hospital. Fifteen minutes after arriving at the next hospital, Michelle died, probably from a bacterial infection that could have been treated with antibiotics.

Julie, who works at a hospital, explains how her insurance plan refused to authorize a bone marrow transplant recommended for her cancer-riven husband. He died quickly.

Larry and Donna, a late-middle-age couple, find that co-payments and deductibles for treatment after Donna has cancer add up to such a burden that they have to sell their house and move into a small room in their adult daughter’s house. The day they move into their daughter’s house, her husband leaves to work as a contractor in Iraq.

Moore’s camera captures the pain, chaos and forced indignity imposed upon every day people who do their best to deal with an impossible situation.

Moore’s web page announcement also attracted responses from hundreds of employees in the health insurance industry, explaining how their jobs forced them to do things of which they were ashamed.

Lee, a former industry employee whose job was to find ways to deny or rescind coverage for healthcare, explains how hard insurers work to deny care, searching for any pretense. About denials of care and coverage, he says, “It is not unintentional. It is not a mistake. It is not somebody slipping through the cracks. Somebody made that crack, and swept you to it.”

Becky, another industry employee, says through tears that she’s a “bitch” on the phone with clients because she doesn’t want to know anything about their families or personal situations — that knowledge makes the inevitable denial of care too hard to stomach.

And Dr. Linda Peeno, a former medical reviewer for Humana, testifies before a Congressional committee in 1996 that her denial of needed treatment to a patient led to the patient’s death. “I am here,” she told the committee, “primarily today to make a public confession. In the spring of 1987 as a physician, I denied a man a necessary operation that would have saved his life and thus caused his death. No person and no group has held me accountable for this. Because, in fact, what I did was I saved a company a half a million dollars with this.”

With some exceptions, SiCKO’s victims aren’t people without insurance. As Moore narrates, the movie is instead about the travails of the 250 million people in the United States with insurance.

There are some in the movie without insurance, however. A hospital places a destitute and disoriented woman in a taxicab, which drives away and literally dumps her on the street, near a shelter.

Rich, who has no insurance, has an accident in which he saws off the tips of two fingers. He is told sewing the ring fingertip back on will cost $12,000. The middle finger will cost $60,000. “Being a hopeless romantic,” Moore narrates, Rich chooses the ring finger.

The publicity for SiCKO says the movie sticks to Michael Moore’s “tried-and-true one-man approach” and “promises to be every bit as indicting as Moore’s previous films.”

This is actually somewhat misleading. The approach is a little different. There’s humor, but there aren’t many gimmicks in SiCKO. There’s no effort by Moore to confront industry executives. Moore himself has a much smaller role than in previous films.

It is also a bit deceptive — as an understatement — to say SiCKO is as indicting as Moore’s previous films. No matter how big a fan you may have been of Moore’s earlier movies, you’ll find that SiCKO cuts deeper and is more powerful and profound. SiCKO is, by far, his best movie.

This is, simply, a masterful work. It is deeply respectful of and compassionate towards the victims. It seethes with outrage, but its fury is conveyed by all of the horrifying stories it presents. The narrative is, by and large, understated. It overflows with raw emotion, but manages to explain clearly the systemic imperatives that lead the richest nation in the history of the world to fail so miserably at delivering healthcare to all.

Could things be different in the United States?


The second half of SiCKO looks at other countries’ healthcare systems, and finds that national, single-payer insurance delivers far better care. More on this in my next column.

Sneak previews for SiCKO are being shown around the United States on June 23. The movie opens nationally on June 29. Be ready to be driven to tears and rage.