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Reimagining Journalism: The Story of the One Percent

Billionaire hedge fund manager Paul Singer, who has contributed millions of dollars to Republican causes and recently endorsed Marco Rubio for president, with DealBook founder Andrew Ross Sorkin at a conference in New York City, December 2014
Thos Robinson/Getty Images
Billionaire hedge fund manager Paul Singer, who has contributed millions of dollars to Republican causes and recently endorsed Marco Rubio for president, with DealBook founder Andrew Ross Sorkin at a conference in New York City, December 2014

1.

Despite fizzling out within months, Occupy Wall Street succeeded in changing the terms of political discussion in America. Inequality, the concentration of wealth, the one percent, the new Gilded Age—all became fixtures of national debate thanks in part to the protesters who camped out in Zuccotti Park in lower Manhattan. Even the Republican presidential candidates have felt compelled to address the matter. News organizations, meanwhile, have produced regular reports on the fortunes of the wealthy, the struggles of the middle class, and the travails of those left behind.

Even amid the outpouring of coverage of rising income inequality, however, the richest Americans have remained largely hidden from view. On all sides, billionaires are shaping policy, influencing opinion, promoting favorite causes, polishing their images—and carefully shielding themselves from scrutiny. Journalists have largely let them get away with it. News organizations need to find new ways to lift the veil off the superrich and lay bare their power and influence. Digital technology, with its flexibility, speed, boundless capacity, and ease of interactivity, seems ideally suited to this task, but only if it’s used more creatively than it has been to date.

Consider, for instance, DealBook, the online daily financial report of The New York Times. It has a staff of twelve reporters plus a half-dozen columnists covering investment banking, mergers and acquisitions, private equity, hedge funds, venture capital, and regulatory matters. Every day, DealBook posts a dozen or so pieces on the Times website, some of which also appear in the print edition, making it seem a good vehicle for showing how Wall Street really works.

Unfortunately, it only intermittently delivers. Most DealBook postings are narrowly framed, with a heavy emphasis on CEO comings and goings, earnings and expectations, buyouts and IPOs. Some sample headlines: BB&T Is New Deal-Making Powerhouse in Banking.” “Investors Hope to Ride Swell of SoulCycle Fever in Coming IPO. “Dell Is the Straw That Stirs Tech M&A.” “Strong Profit for Bank of America, and Investors See Signs of Progress.” Some pieces veer into outright boosterism. A long feature on “How Jonathan Steinberg Made Good on a Second Chance,” for instance, described in admiring detail how this mogul, through a combination of pluck and savvy, built his asset management firm into “one of the fastest-growing fund companies around.”

DealBook’s founder and editor, Andrew Ross Sorkin, is known for his closeness to Wall Street executives (many of whom serve as sources of information), and it often shows in his weekly column. In one that appeared on October 3, 2011, two weeks after the start of Occupy Wall Street, he explained that he had decided to visit Zuccotti Park after getting a call from the chief executive of a major bank:

“Is this Occupy Wall Street thing a big deal?” the CEO asked me. I didn’t have an answer. “We’re trying to figure out how much we should be worried about all of this,” he continued, clearly concerned. “Is this going to turn into a personal safety problem?”

After speaking with some of the occupiers, Sorkin concluded that the bankers were not in imminent danger, though he warned that they did have to grapple with the demonstrators’ demands for accountability for the financial crisis and growing inequality.

Sorkin sometimes writes critically of Wall Street (as in a recent column expressing skepticism about the sustainability of the current merger wave), and DealBook as a whole has become far more critical of the financial industry than it once was. In 2013, for instance, Eric Lipton and Ben Protess revealed how a section of a bill weakening a key clause in the Dodd-Frank Wall Street Reform and Consumer Protection Act was written almost word-for-word by Citibank. In 2014, DealBook ran a series about how Wall Street is financing a potential bubble in subprime auto loans, with the poor hit especially hard, and this past November it ran three long articles about how arbitration clauses buried in millions of contracts bar Americans from joining together in class-action suits, effectively depriving them of the right to take companies to court.

DealBook routinely reports on criminal probes into corporate wrongdoing, such as the investigation of Libor, the interest-rate-rigging case involving London banks and the standard rate. It also keeps track of the revolving door between Washington and Wall Street, like the hiring in March of former Federal Reserve board member Jeremy Stein by the BlueMountain Capital Management hedge fund. As well, DealBook has been thoroughly chronicling the recent turbulence in the hedge fund world.

As DealBook’s name indicates, though, its overriding concern is deals, and though its coverage of them provides much useful information for the large number of people working on or investing in Wall Street, the site does not examine the world of the one percent with the vigor and urgency it deserves.

Apart from DealBook, the Times runs many hard-hitting stories about finance flimflam and corporate malpractice. No other American news organization, in fact, does a better job of scrutinizing the actions of the powerful and holding them accountable. The paper has exposed how companies like GE and Apple exploit loopholes to avoid paying taxes, how corporate lobbyists coax favorable deals from state attorneys general, how Walmart bribed officials in Mexico. The “Upshot” section offers regular in-depth analysis of inequality in America, and Gretchen Morgenson’s weekly column provides a close look at the many ways in which Wall Street seeks to pad its profits at the expense of everyone else.

Over the summer, Times editors convened a series of brainstorming sessions about how to expand the paper’s coverage of the one percent, and the fruits of those discussions have begun to appear. On October 11, for instance, the paper featured a front-page article by Nicholas Confessore, Sarah Cohen, and Karen Yourish about how 158 families had, in the first phase of the presidential campaign, contributed $176 million to Democratic and Republican candidates—almost half the total money raised. These donors, the Times noted, are overwhelmingly white, older, and male; live in exclusive neighborhoods in a handful of cities and towns; and lean overwhelmingly to the right. The online version of the story featured a map showing where these families live, photos of some of their mansions, and a list of all 158 donors along with the sums they’ve given, gleaned from FEC and IRS filings.

It’s encouraging to see the Times devote more resources to covering the wealthy. Even so, its approach seems too limited and scattershot. After running the story about the 158 powerful families, for instance, the paper moved on, with little follow-up. As a result, the impact of its reporting was not as deep or lasting as it could have been. The problem is hardly limited to the Times. In American journalism as a whole, the coverage of the superrich is far too sporadic, fleeting, and unimaginative to make a real difference. News organizations need to develop a new methodology that can allow them to document the structure of wealth, power, and influence in America—to show how the ultrarich make their money, what they do with it, and to what effect. The coverage needs to be more sustained, ambitious, and broadly conceived. And digital technology can help.

2.

To get an idea of how journalists might proceed, imagine for a moment that DealBook decided to adopt a new approach dedicated to revealing the power and influence of the financial elite. What might it look like? A good starting point is a DealBook posting that appeared in May on the “Top 5 Hedge Fund Earners.” For each, DealBook provided his 2014 earnings along with a brief biographical note. Heading the list was Kenneth Griffin, the CEO of the Chicago-based Citadel, whose income for the year came to a whopping $1.3 billion. Here in full was the accompanying note: “Mr. Griffin started by trading convertible bonds out of his dormitory at Harvard. His firm, Citadel, posted returns of 18 percent to investors in its flagship Kensington and Wellington funds.”

Appearing beneath the note was a link to two Times articles. One of them, from July 24, 2014, described the acrimonious divorce proceedings between Griffin and his wife, Anne Dias Griffin, who ran her own investment firm and who had helped elevate her husband’s status in the art world. The other article, dated April 2, 2015, described Griffin’s contribution of more than $1 million to Rahm Emanuel’s campaign for his second term as mayor of Chicago. It mentioned some of the large political donations Griffin has made in the past, including the more than $13 million he gave to Bruce Rauner, a Republican, in his successful campaign for governor of Illinois in 2014. The piece also noted that Griffin has given $150 million to Harvard College for its financial aid program and spent $30 million for two apartments in the Waldorf Astoria Chicago.

While useful, this information barely scratched the surface of Griffin’s influence. Going online, I tried to piece together a fuller picture. According to the Chicago Business Journal, Griffin is considered the richest person in Illinois. A post on CNBC’s website said that Citadel’s recent success “has arguably made Griffin the most powerful figure in hedge funds.” Unfortunately, it did not say what forms that power takes. At OpenSecrets.org—the excellent database of the Center for Responsive Politics—Griffin and his then wife are listed as the thirteenth-largest contributor to Super PACs in 2014, with large sums going to both American Crossroads (cofounded by Karl Rove) and America Rising, which does opposition research on Democratic candidates.

OpenSecrets.org also noted that earlier this year Citadel hired former Federal Reserve chairman Ben Bernanke to serve as an adviser. “Citadel’s employment of Bernanke,” it stated, “is far from the first illustration of the revolving door that former regulators and legislators swing through on their way to Wall Street.” While Bernanke has said that he is “sensitive” to that perception, the site went on, his “access and influence in D.C. may be as valuable as his expertise.” (In fairness, the news of Bernanke’s hiring was broken by Andrew Ross Sorkin and Alexandra Stevenson in the Times.)

From Muckety, a website that uses digital technology to create maps showing paths of influence, I learned that Griffin is a trustee of both the Art Institute of Chicago and the Whitney Museum; a director of the Economic Club of Chicago; an advisory board member of the Eurasia Group, a risk-assessment firm; a trustee of the University of Chicago; and a member of the Committee on Capital Markets Regulation. Muckety did not, however, offer any details about the nature of Griffin’s participation in these institutions or the influence he might have over them. What kind of sway, I wondered, does he have on the operations of the Whitney? How much influence does his trusteeship at the University of Chicago give him? How powerful is the Economic Club of Chicago, and what part does Griffin play there?

I was especially curious about the Committee on Capital Markets Regulation, which I’d never heard of. Going to its website, I discovered that it’s yet another of the dozens of trade groups and associations dedicated to protecting Wall Street’s interests in Washington. Others include the Financial Markets Association, the Financial Services Roundtable, the Global Financial Markets Association, the Institute for Financial Markets, the Private Equity Growth Capital Council, and the Securities Industry Finance Markets Association. All of these organizations have powerful boards, sizable budgets, and considerable influence, yet no one is watching them. Members of the Committee on Capital Markets Regulation, I found, include such prominent figures as Glenn Hubbard, the dean of the Columbia Business School; Abigail Johnson, the CEO of Fidelity (whose estimated worth is $11 billion); John Thornton, the former president of Goldman Sachs, the current head of the world’s largest gold-mining company, and the cochair of the Brookings Institution’s board of trustees; and Paul Singer, the CEO of Elliott Management, another prominent hedge fund.

Looking more closely at these individuals, I became fascinated with Singer. He seems to typify the ability of today’s ultrarich to amass tremendous power while remaining out of the limelight. Singer did receive a flurry of attention in late October when news broke of his decision to back Marco Rubio’s presidential bid, but it quickly faded, and he moved back into the shadows. Going online, I found out (from Forbes) that Singer is worth about $2 billion. He is the single largest donor to the Republican Party, with his money going overwhelmingly to candidates who support free enterprise and oppose regulation. (A major exception is his support for groups promoting gay rights and same-sex marriage; his son is gay.)

From the Times I learned that the fund-raisers Singer hosts in his apartment on Manhattan’s Upper West Side can net more than $1 million a session, and I read in The Wall Street Journal that he was instrumental in the selection of Paul Ryan as Mitt Romney’s running mate in 2012. In a detailed profile of Singer in Mother Jones, Peter Stone noted that Elliott Management has frequently been called a “‘vulture fund’ because a chunk of its profits comes from buying distressed companies’ or countries’ debt at a steep discount.” In 2012 a subsidiary of the firm, seeking to extract full payment from Argentina for some bonds on which it had defaulted, had an Argentine naval vessel impounded in a Ghanaian port. In 2004, Singer contributed $5,000 to Swift Boat Veterans for Truth, which attacked John Kerry’s war record, badly damaging his presidential bid. Since then, he has given generously to American Crossroads and the Club for Growth, an anti-tax group that has backed many Tea Party candidates.

Singer’s influence, though, extends far beyond that. He is chairman of the board of the Manhattan Institute, a member of the board of Commentary magazine, and a major donor to the American Enterprise Institute. He has given to and/or sat on the boards of several organizations dedicated to a strong Israel, including the Jewish Institute for National Security Affairs; the Republican Jewish Coalition; the American Israel Education Foundation, an affiliate of the American Israel Public Affairs Committee that sponsors trips to Israel by members of Congress; and the Israel Project, a group dedicated to boosting Israel’s image. From 2008 to 2011, Singer gave $3.6 million to the Foundation for Defense of Democracies, which has worked tirelessly to isolate and sanction Iran.

All of these groups were active in the campaign to kill the nuclear deal with Iran. As I examined their interlocking boards and overlapping missions, I became aware of the enormous political, financial, and lobbying infrastructure behind that campaign. From Paul Blumenthal at The Huffington Post I learned that four hawkish-on-Israel billionaires—Singer, Sheldon Adelson, Home Depot founder Bernard Marcus, and Seth Klarman, the head of the private investment house Baupost—gave a combined $11.5 million to anti-Iran groups from 2011 through 2013 (while also giving $115 million to Republican Party Super PACs in the 2012 and 2014 elections). A parallel array of groups (led by J Street and the Ploughshares Fund) worked to support the deal, but as Eli Clifton pointed out at LobeLog, the anti-Iran groups opposing it had operating budgets nearly five times as large as those in support.

Despite the nonstop coverage of the debate over the nuclear agreement, this network remained largely hidden. And though the deal ultimately went through, the network remains intact and determined to block its implementation, so its work deserves ongoing attention. Digital technology offers a good means of providing it. Through it, a page could be created listing the many organizations working to affect US policy on Israel and Iran, both conservative and liberal, with information provided on the main participants, funders, and lobbyists of each. Through the use of links, the many ties between these organizations could be shown, with special attention paid to the one group that towers over all the rest—AIPAC.

3.

Establishing such a page would range far beyond the mandate of DealBook. What’s needed, I think, is a more broadly based site dedicated to covering the power elite. Muckety, along with three other eye-on-the-elite groups, LittleSis, SourceWatch, and RightWeb, are all useful, but they are underfunded, overmatched, and (at times) ideologically oriented. A new site with an experienced staff of reporters, editors, and digital whizzes could burrow deep into the world of the one percent and document the remarkable impact they are having on so many areas of American life. As information on them is gathered, it could be incorporated into a database that could become the go-to site for information about the nation’s elite and their power.

To return to Paul Singer, such a website would offer a full accounting of his far-reaching influence. It would, for instance, delve into his work in the field of education, using it as a springboard into an examination of the close but opaque ties between hedge funds, charter schools, and New York politics. Whichever side one takes in the great debate over charter schools, the movement to promote them has become a potent political force whose activities and backers often remain in the shadows.

A website could document how, in the fall of 2014, Singer gave $500,000 to a hastily assembled PAC called New Yorkers for a Balanced Albany, the goal of which was to elect Republicans to the New York State Senate and keep that body in their hands. The PAC was organized by StudentsFirstNY, an advocacy group that supports charter schools, the expanded use of standardized testing, the linking of teachers’ pay to test results, and other elements of the so-called education reform movement. StudentsFirstNY was founded by Joel Klein, the schools chancellor under Michael Bloomberg; Michelle Rhee, the former Washington, D.C., schools chancellor; and the billionaire hedge fund managers Daniel Loeb and Paul Tudor Jones.

The PAC was set up out of the fear that if the Democrats won control of both houses of the New York State legislature, they would approve measures to limit the growth of charter schools. Singer was one of about a dozen financial titans who together donated more than $4 million to the PAC, which used the money to mount an intensive lobbying and ad blitz in the weeks prior to the November 2014 election. (Democratic candidates were backed by some $3.6 million from the political arm of the state teachers’ union.)

While working to elect Republican state legislators, these same hedge fund managers also contributed millions of dollars to back Democratic Governor Andrew Cuomo in his reelection bid. Given the strong support of those managers for charter schools, their contributions may help explain why Cuomo has so vigorously backed the expansion of such schools in the face of New York Mayor Bill de Blasio’s effort to curtail them and instead concentrate on public schools. (De Blasio’s position, in turn, was no doubt influenced by the strong backing he had received from the teachers’ unions.) StudentsFirstNY is now amassing a war chest to promote charter schools in the 2016 legislative elections, and in June Singer gave $1 million to its political action committee.

Zephyr Teachout during her campaign for governor against Andrew Cuomo, New York City, September 2014
Andrew Burton/Getty Images
Zephyr Teachout during her campaign for governor against Andrew Cuomo, New York City, September 2014

I learned about that contribution from a story appearing in July in The New York Times. Its focus was StudentsFirstNY and its efforts to keep alive Michael Bloomberg’s education agenda, which particularly favors charter schools; the information about the sums donated by Singer and other hedge fund managers was buried deep in the article and easily overlooked.

Online, I found a more pointed account by the Washington Park Project, a public policy group. Titled “Corruption in Education: Hedge Funds and the Takeover of New York’s Schools,” it was written by Mohammad Khan and Zephyr Teachout, the Fordham Law professor who ran for governor against Cuomo in 2014. The study offered an eye-opening look at the large sums being spent by what it called “a tiny group of powerful hedge fund executives” seeking to “take over education policy” in the state. This “lightning war on public education,” they wrote, was “hasty and secretive” and “driven by unaccountable private individuals. It represents a new form of political power, and therefore requires a new kind of political oversight.”

Teachout and Khan argued that the activities of this group stood in the way of addressing a major obstacle to improving public education in New York State—educational inequity. According to them, “the state is at least $5.9 billion short on its constitutional obligations to its public school children,” which has led to overcrowding and related problems. “Strong public school funding,” they added, “is necessary to ensure small class sizes, arts, sports, counseling, and a rich supportive environment for all children. But billionaire charter champions and their lobbyists have actively worked against it, and even praised massive cuts to public schools.”

Teachout and Khan did not, however, explore the question of why. The enthusiasm with which so many hedge fund managers and other Wall Street executives have embraced charter schools remains something of a mystery. Even if one accepts the premise that America’s public schools are often broken and that many teachers are not up to the job, why have so many billionaires concluded that charter schools are the best way to fix the system? And what are the implications of having such a small group with so little expertise in the field of education exercising such influence in it? The type of website I have in mind would address such questions. Through investigation, analysis, links, tables, charts, and interviews, it would examine the nexus between Wall Street and charter schools, showing how it works and what drives it.

Education policy at the national level deserves similar watching. The nation’s K–12 policy has been strongly shaped by three foundations. One is the Bill and Melinda Gates Foundation, which, with assets of more than $40 billion, is by far the largest philanthropic institution in the world. Over the last fifteen years, it has given billions to promote standardized testing, merit pay for teachers, charter schools, the Common Core, and other elements of the education reform movement. The Eli and Edythe Broad Foundation has concentrated on training superintendents and administrators who subscribe to the principles of that movement and seek to carry them out on the ground. And the Walton Family Foundation (endowed with Walmart money) has since 2000 given more than $1 billion to charter schools as well as to organizations like Teach for America and Families for Excellent Schools, an aggressive advocacy group with close ties to Eva Moskowitz, the controversial head of Success Academy charter schools, whose board includes many Wall Street executives.

Arne Duncan, while serving as the head of Chicago’s public schools, joined the board of the Broad Center, a training division of the Broad Foundation. The foundation’s 2009 report stated that the election of Barack Obama as president and his appointment of Duncan as secretary of education

marked the pinnacle of hope for our work in education reform…. With an agenda that echoes our decade of investments—charter schools, performance pay for teachers, accountability, expanded learning time and national standards—the Obama administration is poised to cultivate and bring to fruition the seeds we and other reformers have planted.

As secretary, Duncan filled many top positions with people with ties to both Broad and Gates.*

The policy implications of all this were nicely summed up in an interview I found on YouTube with Stanley Katz, a professor of public affairs at Princeton and a longtime student of nonprofits. These megafoundations, he said, “have been able to leverage their resources in such a way that their policies have been adopted by state boards of education, local boards of education, and the federal Department of Education.” The result is that “the K–12 policy of these megafoundations is pretty much the K–12 policy of the United States of America.” It’s an illustration, Katz said, of how in today’s America private money can buy public policy.

The activities of these foundations have not gone unscrutinized by the press. In April 2014, for instance, the Times ran a long front-page analysis of the efforts by the Walton Family Foundation to promote charter schools; in September of that same year, the Times Magazine featured a cover story by Andrew Ross Sorkin about Bill Gates’s efforts to remake the teaching of history. The online Hechinger Report offers periodic posts on the Gates Foundation, and in these pages Diane Ravitch has sharply analyzed the record of the education reform movement.

Given the power of that movement, however, far more attention is needed. A website examining the structure of money and influence in America could provide it. It would try to produce an ongoing record of the activities of the foundations and private donors trying to affect education policy—tracking the major participants, showing the links between them, assessing their influence and impact, and analyzing the evidence on the performance of both public and charter schools. The political and lobbying efforts of the teachers’ unions and their allies would be included as well, showing how much money and influence they are able to mobilize in elections and for what candidates. The site could also serve as a sounding board for people in the field, encouraging principals, teachers, parents, and grantees to send in comments about their dealings with these institutions. The most thoughtful could be edited and posted on the site, providing a bottom-up perspective that rarely gets aired.

Education is but one area of American life that is being transformed by Big Money. In a subsequent article, I will look at the growing power of philanthropy and suggest new ways in which journalists can cover it.

—This is the first of two articles.

  1. *

    For more on this, see Joanne Barkan, “Got Dough? How Billionaires Rule Our Schools,” Dissent, Winter 2011.