King David - 'Billionaires I have known': The final installment

https://prospect.org/power/2024-12-24-king-david-rubenstein/


David Rubenstein in September 2022

In December of 2019, as House Democrats were drawing up articles of impeachment against President Donald Trump, I was again introduced to the viewers of Fareed Zakaria GPS on CNN: “This is a historic moment. So how do historians look at it? I’ll talk to Doris Kearns Goodwin, Rick Perlstein, and David Rubenstein …” One of these things is not like the other. Prospect readers know David Rubenstein is not a historian, but the billionaire founder of the Carlyle Group, a private equity firm. Much like those English monarchs who by reason of the 1322 statute of Prerogativa Regis to this day enjoy personal ownership of all “Whales and great Sturgeons taken in the Sea or elsewhere within the Realm,” titles the rest of us have to earn by sweat and struggle, David Rubenstein possesses by right. Though that is hardly the most brazen of his thefts.

Born in 1949 to an immigrant mother put to work in a dress shop when she was six and a father who worked his way up to file clerk at the Postal Service—details we will be revisiting later—Rubenstein was an idealistic 27-year-old constitutional lawyer when he was tapped to become deputy domestic policy assistant in the Carter White House. “He strongly believed in the nobility of being a public servant” and was fantastically devoted to it, Dan Briody wrote in his excellent 2003 book The Iron Triangle: Inside the Secret World of the Carlyle Group. “Some thought that he was actually living in the White House.” No wonder, then, that he hated the lobbying job he took after Carter lost. “I found it demeaning,” he recalled to a reporter in 1993. Wait ’til you learn about the work he apparently did not find demeaning.

The next bit sounds like the setup for a joke from a time when comedians wore tuxedos. In 1986, a wizardly tax lawyer named Stephen Norris was looking for someone who knew some powerful Eskimos. He called Rubenstein, who allegedly had the biggest Rolodex in Washington. Norris had learned that Native Alaskans had been awarded a certain tax loophole in 1983 to soften the impact of losses from failed tribal business ventures: They could sell $10 million in tax write-offs to willing buyers for $7 million in cash; the buyer thus got to reduce their taxable net income by $3 million. The loophole was intended to have a small effect; Norris and Rubenstein figured out a way to run it at industrial scale. All told, according to Briody, the duo starved the federal Treasury of something like a billion dollars.

This was the gang that incorporated in 1987 as the Carlyle Group. Even the moniker bespeaks a staggering obsession with status: They named it after the grand old Manhattan hotel whose name had been synonymous with luxury ever since it opened in 1930. As Briody notes, it “sound[ed] like old money.” Which was ironic, because that was the same reason its Jewish developer named it after a long-dead British author in the first place. It’s a Gatsbyesque story with Reagan-era accents. This was the dawn of an era when two age-old markers of status, “smartness” and wealth, were merging as one. “I thought I had a pretty good I.Q. myself, and people were making a lot more money than me who I thought maybe weren’t so smart,” Rubenstein told Michael Lewis for a 1993 New Republic profile, “The Access Capitalists,” that first brought him to wider attention. Access was Norris and Rubenstein’s instrument, like the alto saxophone was Charlie Parker’s.

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