The Silver Lining of the New Gilded Age: Fewer Targets

The Silver Lining of the New Gilded Age: Fewer Targets

When a private equity firm like Blackstone becomes a mega-landlord, money lender, and construction behemoth, many different progressive constituencies can come together to pressure and bargain with it.

October 22, 2018

At noon on January 17 of this year, activists began protesting outside the Blackstone Group’s New York City headquarters over the private equity giant’s foreclosures in Puerto Rico. Simultaneously, a social justice group in California released a report detailing Blackstone’s alleged mistreatment of thousands of the state’s tenants.

The timing was no coincidence.

The extreme concentration of economic ownership and power in 21stt-century America is creating more opportunities for disparate groups—from renters and unions to community groups and financial reform organizations—to ally against common adversaries and pressure them for broad concessions. This growing collaboration points to what some see as a necessary reaction and potential silver lining to the New Gilded Age.

“The same guys own everything,” Stephen Lerner, a veteran community and labor organizer, told a crowd of labor leaders in New York City late last year. “We can align our forces in a different way because we have the same enemy.”

Nurturing these alliances offers a promising path forward for a resurgent progressive movement and for unions accustomed to playing defense, Lerner and other organizers say. Converging campaigns against Blackstone will test this theory in a big way.

Drawing on capital from banks, pension funds, and other investors, private equity firms such as Blackstone, Apollo Global Management, and the Carlyle Group are controlling more and more companies, increasingly impacting not just employment conditions, but housing affordability, credit availability, infrastructure, and the environment.

Other asset managers, such as mutual fund and exchange-traded fund (ETF) providers Vanguard and BlackRock, wield considerable influence over publicly traded American companies—just 28 of which reportedly claim half of the total profits earned by the Standard & Poor’s 500. And the list of behind-the-scenes mega-investors also includes hedge funds—risk-takers that pile in and out of assets with sometimes destabilizing consequences.  

In all, institutional investors managed 67 percent of U.S. public stocks by market capitalization in 2010.

The narrowing pool of economic shot-callers “makes it possible for us to build a far larger and more broad-based social movement than we had in the past,” argues Joseph McCartin, a labor historian at Georgetown University.

(Hedge Clippers)

Members of groups including Hedge Clippers and the Center for Popular Democracy protest outside Blackstone's New York headquarters in January.

Organizations such as Hedge Clippers and LittleSis may have laid some of the groundwork. They are enlarging the spotlight that the Occupy movement put on banks to include the shadowy asset managers that control companies behind the scenes, and to the political relationships that these financial behemoths maintain to fortify their power.

Frequently, these groups’ research reveals that a single economic actor is simultaneously squeezing many constituencies. This opens the door for campaigns that build on both the age-old conflicts of the first Gilded Age and the new strategy of bargaining for the common good—that is, effectively, bargaining with the 0.01 percent.

Under this approach, a range of stakeholders can negotiate “with the profiteers who hold real power over their lives and workplaces, instead of with straw employers who do not control the wealth,” according to a recent concept paper by Jobs With Justice, a network of social justice and labor coalitions.

Due to its octopus-like reach, Blackstone is an optimal target. Led by billionaire Stephen Schwarzman, the former chairman of President Donald Trump’s now-defunct business advisory panel, Blackstone is the world’s largest private equity firm, reporting $439 billion in assets under management firm-wide. Blackstone portfolio companies oversee 460,000 employees, 296,000 residential units and large mortgage and installment loan lenders. The company says it plans to invest at least $100 billion into infrastructure in the coming years.

Leveraging capital from pension funds, insurance companies, and endowments, private equity firms buy companies (and other assets) and then extract profits, often by loading the companies with debt and squeezing workers and other stakeholders.

As the industry giant, Blackstone has inevitably come under fire from many groups on issues ranging from its allegedly exploitive housing and lending practices to labor disputes, crony capitalism, and environmental destruction. There will be a push in the coming years to turn the company into “a lightning rod to coalesce work that’s occurring across many different movements … and really put pressure on Blackstone to win big for our communities,” said Saqib Bhatti, co-executive director of the Action Center on Race and the Economy (ACRE).

Blackstone, of course, rejects its critics’ allegations of wrongdoing. The firm “has a long history of productively engaging with organized labor and other community groups, and good relations with our local stakeholders,” a Blackstone spokesman said. Rather, it seeks to “create positive value not only for our investors—who include more than 30 million pensioners in the United States alone—but also for the communities where we invest.”

Intersecting campaigns will increasingly pressure Blackstone, through protests and public information campaigns, to live up to this rhetoric. Activists will also campaign for pension funds—the safekeepers of workers’ capital and the largest category of investor in private equity—to pressure Blackstone to heed their demands.

(Stephen Lerner)

Stephen Lerner in 1988

Blackstone’s single-family rental empire, Invitation Homes, has been a major target for activists. Across more than a dozen markets, the company has amassed more than 80,000 single-family rentals (largely by snapping up foreclosures), and has long been accused of exploiting tenants through overcharging, neglecting units, and strictly enforcing eviction policies.  

The Alliance of Californians for Community Empowerment (ACCE) is one group that has pushed for an end to these alleged practices. It has demonstrated inside Blackstone’s offices and is leading a statewide campaign for rent control of single-family units.

A January report released by ACCE, Americans for Finance Reform, and Public Advocates Inc. flagged government subsidies to Invitation Homes and the close relationship between President Trump and Schwarzman. “As we unite around some of these corporate actors like Blackstone, we can see winning a collective-bargaining agreement for tenants,” said Amy Schur, co-executive director of ACCE.

ACCE helped gather enough signatures—more than 500,000—to introduce the November ballot measure (Proposition 10) that offers Californians the chance to repeal Costa-Hawkins, a law that prohibits local governments from applying rent control to much of the state’s housing stock, including single-family rentals.

Blackstone’s move into mortgages, another bid to capitalize on the housing meltdown, has also sparked pushback. Groups such as Make The Road, the Labor Council for Latin American Advancement, and the Private Equity Stakeholder Project have called on Blackstone to bar its affiliates (Finance of America and Bayview Asset Management) from foreclosing on hurricane-affected areas in Puerto Rico, Florida, and Texas. The January protest at Blackstone’s headquarters—in conjunction with the release of the ACCE report—was part of this campaign.   

Activists have also pressured the New Jersey government-worker pension fund, which has reportedly invested billions with Blackstone, to lean on the firm to halt foreclosures in Puerto Rico. Confronted with this and other forms of pressure, Blackstone largely stopped foreclosing on Puerto Ricans and asked the government to extend a foreclosure moratorium there, Private Equity Stakeholder Project’s Jim Baker said. The moratorium was extended multiple times but finally expired on September 16.

In early September, a Blackstone spokesman said it planned to resume foreclosures in accordance with government guidelines when the moratorium lifted. But Baker said Blackstone appears to have held off so far, even as the mortgage affiliate of another private equity firm, TPG Capital, has resumed legal action against distressed borrowers on the island.

Blackstone, through its portfolio company Lendmark, is also a major player in the installment loan business, which has come under fire for allegedly sending cash-strapped workers deep into debt by pushing high-interest short-term loans.     

Last December, groups including Americans for Financial Reform and the Center for Responsible Lending sent a letter to Blackstone calling on it to cap interest rates at 36 percent, not to lobby for higher state limits and to refrain from requiring borrowers to agree to settle potential disputes through arbitration. A “variety of fees, ancillary payments, and insurance” can push actual rates paid by installment loan borrowers into the “double or triple digits,” the letter noted.


Blackstone later updated a filing that had indicated that Lendmark planned to lend at an effective interest rate of up to 60 percent, changing that to a maximum rate of 36 percent instead. A spokesman claimed the filing had incorrectly shown a maximum rate of 60 percent.

As Blackstone-backed companies employ roughly half a million people, the firm periodically finds itself at odds with unions. Threatening to march on Schwarzman’s Manhattan home and highlighting his relationship with Trump played a key role in resolving a 2017 strike by workers at a chemical plant in Waterford, New York, according to Michael Kink, a co-founder of Hedge Clippers. Schwarzman was targeted because Blackstone once was part-owner of Momentive Performance Materials, the company that owned the plant.

Hundreds of workers represented by IUE/CWA Local 81359, a local chapter of the Communication Workers of America, focused their wrath on Schwarzman and Leon Black, the head of private-equity firm Apollo Global Management, after a Hedge Clippers’ report called the two “puppet-masters,” accusing them of loading the company with crushing debt and “demanding that their lap-dog executives hit workers with job, pay, and benefits cuts.”

A Blackstone spokesman said the firm had already sold its minority stake in Momentive before the strike began. But the union wouldn’t let Blackstone wash its hands of its past investment and the cuts that ensued. This persistence paid off for members when Momentive agreed to back off on some of its demands, Kink said.

Some organizers envision such labor disputes as launch pads for more expansive bargaining. Consider an idea once floated by Lerner. Imagine, he wrote for the New Labor Forum in 2016, if the unions that represented workers at Hilton Hotels and Equity Office—both of which Blackstone largely owned at the time—joined with community groups “in a campaign to fully unionize Blackstone-controlled companies, and to demand that the firm freeze rents on rental properties at affordable rates.”

Such campaigns could grow out of contract negotiations between unions and Blackstone. Union demands that originate in self-interest would expand to cover wider communities as members linked their fate with other workers—an example of the new doctrine of bargaining for the common good.


$100 Billion on Infrastructure

With Blackstone poised to plough as much as $100 billion into infrastructure over the next few years, it will effectively employ many thousands of additional workers.

Whether or not the Trump administration ever gets serious about boosting infrastructure funding, Blackstone has already secured $5 billion in funding for such projects (which could be leveraged into much more using debt) from institutional investors, including Saudi Arabia’s sovereign wealth fund. The firm has entered “full deployment mode,” Blackstone’s president Jonathan Gray said in a July earnings call. He told investors that Blackstone is evaluating a “pipeline of interesting opportunities,” across the “telecom, infrastructure, renewables, and obviously, some public-private partnerships as well.” These investments make it a bull’s eye for environmentalists and other activists opposed to the privatization of infrastructure.

Blackstone has put itself at odds with organized construction labor by acquiring the Tradesmen International, a pioneer of outsourced non-union building trades labor. However, it has also headed off potential tensions by inking a “responsible contractor” agreement with North America’s Building Trades Unions (NABTU). Under the agreement, Blackstone’s infrastructure business will contact NABTU about new investments, and favor “responsible contractors” that pay fair wages, offer training, and respect the right to unionize.

Blackstone might have been inspired to seek the agreement due to new “responsible contractor policies” adopted by New York City pension funds in May.  

Surveying all of the ongoing and potential conflicts, McCartin, the Georgetown professor, says you can see “glimmers of a common good settlement [with Blackstone] emerging in some of these settings, even though the breakthrough might still be a long way off.”

Under such an agreement, Blackstone might promise to cap rent increases, to not oppose unionization, to commit to certain wages and benefits, to cut interest rates on installment loans, and to do more to help distressed borrowers hang onto their homes.

This sort of grand bargain is largely aspirational and initial victories may be more incremental. “It’s not like nobody [should] settle with Blackstone until it agrees to everything,” Lerner says. “Let's maximize pressure and groups should take victories as a way of building momentum."

Another benefit of pursuing a common good settlement would be to “open our imagination to the kind of role the government needs to play in the 21st-century,” McCartin adds. “We need to activate the state as an instrument that serves the interests of the common good, not just the wealthy.”

Such measures could include proposals to diminish private equity’s clout by eliminating the “carried interest” tax break for asset managers—a bill put forward by New York Governor Andrew Cuomo would do just that in his state—and to legalize or expand rent control.

In meetings at the headquarters of the AFL-CIO, unions, community and social justice groups, and financial reform organizations have discussed how to deal with Blackstone and other asset managers. The gatherings have sown the seeds for more collaboration, with some organizations now holding regular calls about Blackstone, said ACRE’s Bhatti, who helped plan one of the meetings.

The AFL-CIO is not facilitating campaigns against Blackstone at the moment, said Heather Slavkin Corzo, director of AFL-CIO’s office of investment. But the union federation is “looking closely at private equity and its implications for investors, and considering whether we should release a critique.”

Corzo’s comment points to another tactic that activists hope to leverage: cajoling pension funds—collectively, the largest investors in private equity—to push Blackstone and others to take the high road. Lerner has argued that unions engage in “assisted suicide” by allowing their pension funds to invest with asset managers whose mission is to “suck money out of our lives.”

Some advocacy work to resolve this contradiction has already paid off. New York City government pension funds—which have collectively invested billions of dollars with Blackstone—adopted unusually strong responsible contractor policies in May 2017. And the New York state pension fund, also a major investor with Blackstone, debuted a similar policy a few months later.

The policies apply to any future private equity investments in real estate and infrastructure, and may have factored into the decision by Blackstone—which is trying to raise billions more for its infrastructure fund—to strike its own responsible contractor policy with NABTU, announced last September. The Office of the New York City Comptroller Scott Stringer, which oversees New York City pension funds, declined to comment on this possibility.

“As a $190 billion pension fund, when we act, others notice,” said Stringer. “Because of the New York City pension funds' influence, private equity firms might feel inspired to agree to responsible contractor policies.”

Still, only the largest pension funds have much of a shot at persuading private equity managers to agree to special investment standards, says Eileen Appelbaum, co-author of Private Equity At Work.

The movement gathering against Blackstone can draw inspiration from another that continues to bear down on Wells Fargo. There, too, a diverse range of groups have made common cause against a financial titan. The Committee for Better Banks, founded by the Communication Workers of America, helped expose the bank’s unauthorized creation of more than two million accounts. The Saint Paul Federation of Teachers has called on it to stop foreclosing on families during the school year. And Divest LA has successfully pressed Los Angeles city government to stop banking with the company, citing its financing of Dakota Access Pipeline and private prisons.

The battles against Blackstone and Wells Fargo are helping develop what may become a lasting base from which to bolster campaigns against other targets, such as Bain Capital and KKR, which were largely responsible for the liquidation of Toys ‘R’ Us. Mutual fund and ETF providers BlackRock, Vanguard, and State Street Corp., which reportedly own about 21 percent of firms traded on the U.S. stock market, may also feel heat as such campaigns expand and proliferate. Hinting toward BlackRock’s power to unseat corporate executives, BlackRock CEO Larry Fink recently warned CEOs that they must focus more on contributing to society, and less on short-term profits.

Fink should put his money where his mouth is, LittleSis later wrote in a blog post. “BlackRock is a huge investor in some of the nastiest industries around—private prisons, fossil fuels, and shady banks, to name a few,” the post reads. “But whether or not Fink will use BlackRock’s power to advance economic security, climate sustainability, and social justice remains to be seen.”

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