White House officials have been pressing top business executives, like Lloyd C. Blankfein of Goldman Sachs, to support higher taxes on wealthy Americans. Chip Somodevilla/Getty Images
By NELSON D. SCHWARTZ and JONATHAN WEISMAN Published: December 11, 2012
A broad swath of the nation’s leading chief executives dropped its opposition to tax increases on the wealthiest Americans on Tuesday, while the White House quietly pressed Wall Street titans for their support as well.
Before Tuesday’s about-face, the Business Roundtable had insisted that the White House extend Bush-era tax cuts to taxpayers of all income brackets, but the executives’ resistance crumbled as pressure builds to find a compromise for the fiscal impasse in Washington before the end of the year.
“We recognize that part of the solution has to be tax increases,” David M. Cote, chief executive of Honeywell, said on a conference call with reporters. “That’s the only thing that allows a reasonable compromise to be reached.”
Even as the Fortune 500 leaders announced their shift, the White House continued to work behind the scenes to woo some of Wall Street’s most powerful financiers — a group that had largely abandoned President Obama in his bid for a second term after supporting him in 2008.
After seeking out corporate leaders from industrial companies last month, the White House has intensified outreach to Wall Street in December.
On Wednesday, several hedge fund managers, including Daniel Och, the billionaire founder of Och-Ziff Capital Management, will meet with Valerie Jarrett, a top adviser to the president, and members of the White House economic team.
Last Monday, White House officials sat down with a more than half a dozen top bankers and financiers, including Gary D. Cohn, president of Goldman Sachs, and Greg Fleming, head of wealth management at Morgan Stanley.
The differing strategies — highly public meetings with corporate America and private arm-twisting with Wall Street — both appear to be aimed at winning popular support for higher taxes on the wealthy. The trade-offs being roundly fought over in Washington, like what government programs may be cut and which entitlements may be spared, are less important in this effort to muster highly compensated chieftains whose support for tax increases will provide cover for Congressional Republicans wary of being seen as too quick to compromise on higher tax rates.
What’s more, the political symbolism of some of the wealthiest Americans’ saying they support higher taxes on the rich takes a bit of the sting out of the idea of raising rates, for both Democrats and Republicans. Indeed, by appealing to both camps and enlisting their support, President Obama hopes to neutralize potential critics, according to allies of the president on Wall Street.
President Obama’s supporters cited the example of Frederick W. Smith, the chief executive of FedEx. Last week, Mr. Smith signaled he was not angered by higher tax rates for the wealthiest individuals, a centerpiece of President Obama’s plan to reduce the deficit and a key sticking point for Republicans in Congress.
“If people who didn’t support the president believe the president is acting reasonably, they’re going to put pressure on the other side,” said Marc Lasry, a longtime supporter of the president who runs Avenue Capital. “You need both sides to be reasonable.”
For example, Mr. Lasry invited the real estate tycoon Barry Sternlicht, a onetime Obama supporter who raised money for Mitt Romney in the last election cycle, to the White House last week. Mr. Lasry, who has $13 billion under management, including $1.3 billion of his own money, is among a small group of Wall Street figures who stuck with the president before the election, even as those like Mr. Sternlicht deserted him.
This core group met with President Obama on Nov. 16, and included Tony James, president of the Blackstone Group, as well as Roger Altman, a Democratic stalwart who is executive chairman of Evercore Partners, and Robert Wolf, a longtime UBS executive who recently began his own firm, 32 Advisors.
Also in attendance were Blair W. Effron, co-founder of Centerview Partners, and Mark T. Gallogly, a Blackstone veteran who founded Centerbridge Partners in 2005.
To be sure, most executives genuinely fear the consequences of the automatic spending cuts and tax increases if a compromise is not found by Jan. 1, but the efforts by big business to press politicians in Washington could also pay large dividends in the future.
While most business leaders now say they are willing to support increases in tax rates for individuals as well as cuts in entitlement spending, their stance in favor of lower corporate tax rates could actually benefit their bottom lines in the long run.
For now, however, the focus is on reaching a deal by end of the year rather than a broad tax overhaul. At the White House, the outreach effort is being led by Ms. Jarrett, and she has been joined in the meetings with executives and bankers by Timothy F. Geithner, the secretary of the Treasury; Jeffrey Zients, the head of the Office of Management and Budget; and Gene Sperling, director of the National Economic Council.
The White House arranged calls on Dec. 3 and on Monday for chief executives who attended the earlier sessions with the president, updating them on the negotiations and reiterating the need for their support. Among the participants were Lloyd C. Blankfein, the chief executive of Goldman Sachs; Randall Stephenson, the chief executive of AT&T, and Marriott’s chief executive, Arne Sorenson.
Some chief executives, like Mr. Blankfein, who have been relatively outspoken in recent weeks about the need for tax increases, are viewed as relative liberals in the business community.
But others who reversed course Tuesday, like Doug Oberhelman of Caterpillar, are seen as more conservative politically and suggest an important shift in the political landscape in terms of tax policy.
Another more conservative executive who signed a letter to Congress and the president from the Business Roundtable was Rex W. Tillerson, the chief executive of Exxon.
“Compromise will require Congress to agree on more revenue — whether by increasing rates, eliminating deductions, or some combination thereof — and the administration to agree to larger, meaningful structural and benefit entitlement reforms and spending reductions that are a fiscally responsible multiple of increased revenues,” said the letter, signed by more than 100 chief executives.
Besides Mr. Cote, several other prominent chiefs joined the call with reporters organized by the Business Roundtable, including Andrew N. Liveris of Dow Chemical, Jeffrey R. Immelt of G.E. and Alexander Cutler of Eaton.
Small businesses also appear anxious about the fiscal impasse. On Tuesday, the National Federation of Independent Business reported that its Small Business Optimism Index had one of its steepest declines ever in November.
The net percentage of business owners who said they expected better economic conditions in six months — that is, the share that expected improvement minus the share that expected deterioration — was negative 35 percent. That is the worst outlook since the federation began collecting this data on a monthly basis in 1986.
Bill Dunkelberg, the chief economist at the federation, attributed the pessimism to the stalemate in Washington, higher health care costs and “the endless onslaught of new regulations.”
Why HSBC “money-laundering” is Mostly about US Bullying Foreign Policy
Posted on 12/13/2012 by Juan
The “money-laundering” scandal about British bank HSBC is a mixed picture. On the one hand, bank officials laundered money for Mexican drug cartels, allegedly knowingly, which only pond scum would do. Still, the cartels are only in business because the US government irrationally opposes legalization of innocuous agricultural products such as marijuana (the US goes to bat for Big Alcohol all the time, and actively pushes exports of sure-to-kill-people tobacco products, but if 64,000 Mexicans have to die in Washington’s “war on drugs,” too bad).
On the other, HSBC’s dealings with Iran and Syria were not illegal in the UK and only “illegal” in any sense because the United States is, as Felix Salmon rightly says, is taking advantage of the dollar’s position as the world’s reserve currency .. http://blogs.reuters.com/felix-salmon/2012/12/13/why-the-us-didnt-prosecute-hsbc/ .. to bully third parties into a financial blockade against countries it doesn’t like, such as Iran.
Salmon’s analysis explains why the US did not seek criminal prosecutions against HSBC. It wasn’t that the bankers were too big to fail. It was that the US insistence that all the banks around the world not do business with countries like Iran is unreasonable and not backed by international law, and had the US bankrupted HSBC over its financial bullying, it would have drawn the ire of a lot of powerful people in the UK and Europe who know exactly what is going on.
Look into all this very carefully, and you’ll find the US Senate at the bottom of this attempt to strong-arm foreign banks into complying with arbitrary US financial blockades. And look into it a little further, and you’ll find that the unregistered foreign agent, the American Israel Public Affairs Committee has a lot to do with pressuring the Senate to embarrass and fine HSBC. The bank, whatever the moral failings of its executives, is a minor victim in the Tel Aviv-Washington conflict with Tehran.
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