10 Billionaires' Dirty Tricks to Rig the System
Stay up to date with the latest headlines via email.
Being a billionaire is kind of like being a rock star.
Our money-obsessed society tends to celebrate great wealth as evidence of exceptional talent, innovation or accomplishment. In reality, spectacular fortunes are more likely the result of luck, ruthlessness, cheating, or being in the right place at the right time to exploit an opportunity made possible by the insights and efforts of others who paved the way.
Certainly there's no evidence that members of today's elite are any more talented, creative or hardworking than the elite of a generation ago, who received a fraction of the rewards.
If today's rich have shown unusual talent, it's mostly been a talent for rigging the rules in their own favor.
So let's take a quick look at 10 billionaires and some things they probably don't want you to know about them:
Linda McQuaig and Neil Brooks are the authors of Billionaires' Ball: Glutton and Hubris in an Age of Epic Inequality [Beacon, $26.95].
1. John Paulson
In 2006, hedge fund manager John Paulson realized millions of Americans had signed up for mortgages they couldn't afford and would soon start defaulting on their payments, causing the housing bubble to burst. So he took out "insurance" on stocks made up of bundled-together mortgages, which had been sold to investors. Paulson even teamed up with Goldman Sachs to create new stocks -- in which he helped select the mortgages, ensuring there'd be lots of faulty ones - and then took out "insurance" on them. This was like taking out insurance on someone else's car, after arranging with the car manufacturer to put in faulty brakes. When the housing market collapsed, triggering the Wall Street meltdown, Paulson collected $3.7 billion, giving him the all-time record for profiting from the misery of others.
2. Larry Ellison
Software billionaire Larry Ellison is one of the richest men in America. By 2010, he had accumulated a net worth of $27 billion - enough to allow him to spend about $51 million a week or $303,000 an hour -- without even digging into his principal. Nevertheless, in 2008, he contested the tax bill on his 23-acre California estate, and was awarded a $3 million refund, which had to be paid by school boards and municipalities. The Portola Valley School District in northern California repaid him some $250,000, the cost of hiring three or four new teachers. The refund was yet more pocket money for Ellison - enough to increase his spending that week from $303,000 to $321,000 per hour.
Wall Street titan Steve Schwarzman has fought bitterly to hold onto a tax loophole that benefits private equity managers like himself. Schwarzman even characterized attempts by President Obama to close the loophole as "war - it's like when Hitler invaded Poland." Schwarzman, who has a net worth of $4.7 billion, had a better idea for deficit reduction - collecting income tax from millions of Americans who don't pay income tax because they are too poor. Although these poor Americans do pay plenty of payroll and sales taxes, Schwarzman complained that exempting them from income tax amounted to giving them "special deals." In Schwarzman's view, then, removing favored tax treatment from the rich is Hitlerian, while removing favored tax deals from the poor is just sound policy.
4. Mark Zuckerberg
As the inventor of Facebook, Mark Zuckerberg seems like a worthy sort of billionaire. But does he really deserve $17.5 billion (with billions more to come, as Facebook goes public)? Zuckerberg's contribution was actually quite marginal. He simply adapted the technological breakthroughs that had led to the Internet, and before that the personal computer, and before that the mainframe computer... all the way back to the wheel. An estimated 90 percent of all wealth generated today is due to this "knowledge inheritance" of the past. So shouldn't society get a bigger share of the benefits through the tax system? Would that have discouraged Zuckerberg? As he scrambled to develop Facebook, it's unlikely he worried about the taxes he'd pay if he became incomprehensibly rich. Besides, if he'd abandoned his quest, his competitors would have happily completed the job.