Since the formation of the Berkeley Post Office Defense, privatization – the transfer of public control of institutions into private, usually for-profit control – has been understood by the defenders as the main culprit for the loss of our post offices. But privatization is a trend that reaches all across the Earth and represents an attempt by the richest people (we’ll call them the 1%) to extract as much money as possible from institutions such as Universities, public construction projects, and post offices. Despite wide spread knowledge of the nefarious plans of privatizers, the trend continues under the dominant paradigm of neoliberalism. The public sector is being weakened by the wealthiest and greediest individuals, who feel totally justified in siphoning off the value of things, places, and institutions that bring people together in the commons.
One name that keeps reappearing in the conversation on privatization is Richard Blum.
Richard Blum chairs CBRE – the world’s largest real estate company, which has exclusive rights to sell all post office real estate.
Richard Blum’s own company, Blum Capital Partners owns CBRE.
Richard Blum is a UC Regent and was formerly the Alpha Regent.
Richard Blum is married to CA-Senator Diane Feinstein.
But there’s more. Will Parish and Darwin Bond-Graham summarize Blum’s carrier in this article from 2010: DiFi and Blum: A Marriage Marinated in Money.
“Richard Blum is a San Francisco-based finance capitalist presiding over a business empire that is, to say the least, expansive. Hedge funds? Blum owns one outright and wields a significant share of various others. Real estate? His primary investment vehicle, the $7.8 billion Blum Capital Partners, owns the largest real estate brokerage firm on the planet, CB Richard Ellis, of which Blum is chairman of the board. Construction? Until public scandal prompted him to sell off his holdings, Blum was a majority partner in a construction and engineering company that did billions in business with the US military, among other government clients. Education? Try being the resident Alpha Regent of the largest public university system in the world, the University of California, while also being a primary owner of the world’s second-largest for-profit education firm, Career Education Corporation.
Large land-holding firms? Digital media company of which Al Gore serves as frontman? Health industry corporation fighting to undermine the expansion of public health care? Border-town maquiladora that build weapons components for the Department of Defense? Check, check, check, and check.”
As a financier seeking to extend his influence and (highly questionable) intentions around the world, Richard Blum
“and “DiFi” are among the leading proponents of the International Monetary Fund/World Bank/US Treasury nexus’ notion of how economies ought best be developed. This form of economic “improvement” (deriving from the Anglo-French “emprouwer,” meaning “to clear for profit”) involves burying Third World economies under mountains of debt backed by usurious interest rates, facilitating the greatest level of investment possible by rapacious multi-national corporate entities, privatizing government functions, and gutting social services.”
As a UC Regent, Richard Blum has directed millions of dollars in public University of California funds into construction projects signed to his own companies. The man is a living, breathing, walking example of the problems with privatization.
In a subsequent article on Richard Blum and the University of California, Will Parish and Darwin Bond-Graham expand on their findings (see Who Runs the University of California?)
“In 2009/2010, the UC Regents declared a “state of financial emergency” and began hiking tuition and slashing faculty positions to make up for the loss in state funding. Richard Blum personally appointed Mark Yudof as the president of the UC system who was promptly given special “emergency powers”, which he used to further downsize UC but still keep that money flowing…
Notably, it was Blum who virtually hand-picked President Yudof for UC President, having chaired the selection committee that oversaw Yudof’s appointment. At a March 2008 press conference heralding the Yudof hiring, the San Francisco Chronicle noted that Blum seemed “visibly ecstatic.” In April, the Chronicle quoted Blum again, saying of Yudof, “we disagree on almost nothing. If I were giving Mark a grade, I would give him an A-plus.””
Richard Blum’s activity as UC Regent demonstrates his commitment to linking public institutions considered nearly universally good with private profiteering for a few of his friends and business partners. The justification for the necessity of this action (if ever given at all) is pushed quickly and in a time of confusion: the crisis. It is during this period that privatizers sense the moment to manipulate that confusion and direct monetary flows from the greater population to a few financial opportunists. But the actual reasons, when considered cool and calmly, just don’t add up:
“Thus, despite the state budget cuts, the UC’s overall revenue reached an all-time high of $19.42 billion in the 2009-10 academic year, and the Regents’ claim that the UC faces an “imminent and substantial” funding deficit is inaccurate, to say the least. According to both the university’s own financial documents and Moody’s bond rating agency, the university had access to over $8.3 billion in unrestricted investment funds it was holding in reserve at the time.
The university has undergone a neo-liberal-style “structural adjustment” at the behest of the UC Regents, and this transformation has been accelerated during Yudof’s tenure as president. Under the leadership of California’s economic elite, the UC has become the leading prototype for a “disaster capitalist university.”
Under the excuse/opportunity of crisis, the UC Regents have been able to further their privatization agenda. Student debt escalates, teacher’s jobs and salaries are cut, and the vast majority of the public suffers from the loss of truly public services, while a few wealthy financial capitalists get even richer. Being married to a politically powerful Senator and having his hand in so many other investment businesses makes Richard Blum California’s privatization agent #1. This marriage is clearly a conflict of interest when the wife lobbies for the millionaires’ benefit. Bankrolling his investments on non-dischargeable college student debt, Blum has helped turn a great public university into a vast credit vehicle for private profiteering.
“And those subprime student loans? They’re often owned by big banks like Wachovia and other financial outfits that many of the UC Regents and their business partners are shareholders or executives of. So the whole cycle begins and ends with massive public and student debts, both of which increase as the Regents partake in further undermining the tax base while looting the public sector, again ratcheting up the crisis rhetoric.”
The link between the public University of California funds and Blum’s own for-profit universities is touched on in the Banksters cards from Occucards (see their site here):
Student debt has risen to incredible proportions, and voices from all over the place have warned that this is an unsustainable bubble that threatens our entire economic system, as well as the futures of an entire generation of youth (see Student Loans: The Next Big Threat to the US Economy?). Much of this money will not and cannot be repaid. But privatizers like Blum have set up a situation in which the young are financially sacrificed for the benefit of a small group of powerful investors. The federally guaranteed student debt bubble is the base from which profitable construction projects and for-profit college investments have been financed. For some recent facts about the student debt crisis look here.
In the summary of a Peter Byrne’s study The Investors’ Club: How University of California Regents Spin Public Money into Private Profit, Byrne notes on Blum:
“After Mr. Blum was appointed to the Board of UC Regents in 2002, UC invested $748 million in seven private equity deals in which he or his firm, Blum Capital Partners, was a major investor. (Mr. Wachter was involved in one of these deals as an investor). Many of these deals were operated in partnership with TPG Capital, where Mr. Blum is an investor and an executive, according to the economic disclosure statements of his spouse, Sen. Dianne Feinstein (D-California), and other public records…
…UC has also invested $84 million in real estate and private equity deals, as well as the stock of a public corporation, in which Mr. Blum held significant interests”
The entire report is a must read. Byrne details the clear, obvious, in-your-face conflict of interest going on at UC and still going to this day…
Taking a closer look at CBRE in Going Postal: U.S. Senator Diane Feinstein’s husband sells post offices to his friends, cheap, we find the $6.8 billion dollar corporation with its hands all over public money. Richard Blum’s
“privately owned investment firm, Blum Capital Partners, L.P., dominates CBRE’s board of directors through its ownership of 6.9 percent of the company’s shares, which were worth 380 million in March 2013…
Let’s follow the money: According to CBRE filings with the Securities & Exchange Commission, the company earned 5 percent ($325 million) of its revenue from government agencies in 2012.
The leveraging of public funds for private profit has been the core strategy of Blum’s business plan for decades. His privately owned investment firm, Blum Capital Partners, controls billions of dollars in public-employee pension fund capital that Blum regularly invests in his own business deals. His state-subsidized ventures have included building vastly over-budget municipal airports, tunnels, and bridges; manufacturing and selling high-tech weaponry for use in Iraq and Afganistan;develong and selling prosthetic limbs for soldiers wounded in those countries; managing the federal governments’s multi-billion dollar real estate portfolio; and owning for-profit colleges whose primary source of revenue are federally guaranteed student loans and grants authorized by Congress.” (p.26-27)
How do they do it? How did Blum and Feinstein’s (The Blumsteins for short) vampire tentacles spread so far? The answer. To put it as briefly as possible, is Debt.
“The secret of its rapid growth has been a willingness to assume debt in order to gobble up competitors. Such “leveraged buyouts” are a risky business practice: The firm carries a $2.1 billion debt burden that “constrains the operation of our business,” CBRE reported…
Given the ups and downs of the global real estate market, CBRE relies upon dozens of contracts with local, state, and federal government agencies to provide it with 5 percent of its annual revenue – a cash infusion that nearly equals its annual profit margin. To balance its books each year, CBRE depends upon capitalizing a subjectively valued asset called “goodwill”. Every year the dollar value of its goodwill miraculously equals the gap between its assets and liabilities to the penny. Without the ability of its accountants to create net worth-healing goodwill out of thin air, CBRE’s balance sheet would have bled $1.8 billion last year.
Last year, by the way, CBRE paid taxes on a declared profit of 315 million, but it still owes the United States Treasury taxes on the $1.1 billion of earnings that CBRE keeps in foreign tax havens in order to escape paying U.S. Taxes. (p.33-35)
So, CBRE’s strategy is not even a winning one: it exploits its structural position as financiers of a vast web of agencies, institutions, and services to get even bigger. CBRE loads itself down with debt to expand its reach deeper into sectors of the economy, relies on the actually functioning public institutions to make up for their losses (plus “goodwill”), and stores much of its earnings in off-shore tax havens. Ladies and gentlemen, CBRE is the real estate version of “Too Big Too Fail”.
And that’s the whole point: once you reach that level, the “get out of jail free” card grants you free license to all kinds of privatization corruption.
The Post Office has been another victim of greedy privatizers like CBRE. The blatantly obvious malfeasance involved in this sell-off has kick-started BPOD itself…
A brief summary of Peter Byrne’s investigative journalism on Blum’s CBRE and the Postal Service has shown that:
“CBRE appears to have repeatedly violated its contractual duty to sell postal properties at or above fair market values.
CBRE has sold valuable postal properties to developers at prices that appear to have been steeply discounted from fair market values, resulting in the loss of tens of millions of dollars in public revenue.
In a series of apparently non-arm’s-length transactions, CBRE negotiated the sale of postal properties all around the country to its own clients and business partners, including to one of its corporate owners, Goldman Sachs Group.
CBRE has been paid commissions as high as 6 percent by the Postal Service for representing both the seller and the buyer in many of the negotiations, thereby raising serious questions as to whether CBRE was doing its best to obtain the highest price possible for the Postal Service.
Senator Feinstein has, herself, lobbied the Postmaster General on behalf of a redevelopment project in which her husband’s company was involved.”
(p.3-4)
I case you haven’t heard the argument that BPODers have been shouting about for the past 6 months, here is Peter Byrne writing about the pre-funding mandate/ attack on the public by corporate backed politicians:
“80 percent of the agency’s multi-billion dollar deficit is caused by a law passed by Congress in 2006 that requires it to prepay retiree health benefits 75 years into the future. This unprecedented, budget-killing command does not apply to any other government agency. If this burden was to be rescinded – and business mail was to be charged the cost of delivery – the Postal Service would be in the black, according to Congressional reports.” (p.4)
Under the supposed reason of covering losses in revenue, the USPS higher ups have been selling off post office property for years. This nets the USPS some profit, but the ownership of the buildings is now out of their hands.
“And the one-time cash infusions from property sales barely scratch the surface of the structural deficit of $40 billion. The relatively minor proceeds gained from selling off postal facilities are being sucked up by the cost of relocating services from the sold facilities. What’s more, the quick cash won’t be able to cover the increase in overtime being brought about inefficiencies created by lost jobs.” (p.17)
In other words, selling post offices is not helping the USPS with its artificial “crisis”: it is a covert land-grab.
The thorn in the side of much of public financing and debt woes goes by the name Richard Blum. His and his companies removal from the management of public services and institutions would be a great start to a real “structural adjustment” for the good.
Bernie Sanders has introduced a Bill to improve the Post Office and remove the onerous restrictions on it (see here), and Elizabeth Warren has come out in support of exploring the idea of a Postal Bank (see here). UC Berkeley protestors recently occupied the Blum Center for Developing Economies after their #No2Napolitano march (see here). BPOD is still keeping up the fight for Berkeley’s main post office, so stay tuned.
Follow hashtags #Privatization and #Blumsteins for more updates and support the movers, shakers, and protestors fighting back wherever and whenever you can.
Berkeley Post Office Defenders 