House of Cards: A DC Real Estate Column

https://firstlook.org/theintercept/2015/01/29/house-cards-dc-real-estate-column/

Version 0 of 1.

In October of 2014, former Democratic Senator Majority Leader Tom Daschle and his wife sold their seven-bedroom, seven-bathroom house on Foxhall Road for $3.25 million.

It was not an unusually large haul for a member of Washington’s political elite, but it was a big step up from his financial circumstances in 2003. Daschle’s financial disclosure form—filed a year before he lost a race to John Thune, marking the first time in more than half a century that a Senate party leader failed to win reelection—showed his net worth to be between $400,000 and $1.2 million. It was a pitiful amount by congressional standards and led CNN to disparage him as a senator of “modest means.”

After leaving office, however, Daschle immediately began making millions by advising corporations. During the two years prior to his failed nomination to head Health and Human Services he netted $5.2 million, mostly from healthcare, energy, private equity and telecommunications companies. That included big compensation for speaking appearances (he is, according to his speakers’ bureau profile, “a tireless fighter for the common man”) and for authoring such works as, Getting It Done: How Obama and Congress Finally Broke the Stalemate to Make Way for Health Care Reform, which was subsequently found to induce narcolepsy in laboratory rats.

There’s a common perception that government doesn’t work and that “partisan gridlock” has made things worse than ever. But when it comes to fundamental economic questions, there is no partisan divide in Washington and the system is “broken” only if you’re part of the growing slice of the population that’s poor or middle class, for whom average income has been stagnant for decades.

For those at the top of the economic pyramid, like Tom Daschle, government is ruthlessly efficient at funneling money upward via tax cuts and loopholes, corporate subsidies, deregulation and other business-friendly policies. The richest 400 Americans now own more than the bottom half of the population combined and inequality “is greater now than it has been at any time in the last century, and the gaps in wages, income, and wealth are wider here than they are in any other democratic and developed economy,” historian Colin Gordon writes in “A Political History of American Inequality.” Meanwhile, a new report by Oxfam predicted that, by next year, the world’s richest 1 percent will command more wealth than everyone else.

One of the reasons that government works well for the wealthy is that so many elected officials are wealthy themselves, and directly benefit from the economic measures they pass. The median net worth of the current Congress is slightly north of $1 million, according to the Center for Responsive Politics, and that surely understates their wealth because it’s based on financial disclosure forms that don’t require the listing of real estate holdings.

Our millionaire politicians depend overwhelmingly on campaign contributions from their class comrades to win and hold office. Only 0.18 percent of Americans donate $200 per year to political candidates and only 0.03 percent give the legal maximum of $2,600. Washington has about 646,000 residents, just .02 percent of the U.S. population. But in 2014 thus far people using DC home or business addresses have collectively contributed $237 million to federal candidates, PACs, political parties and outside spending groups, about 17 percent of all individual donations. More political money flows out of the 20005 zip code—the heart of the capital’s lobbyist/PR complex—than from each of 19 states.

(For an unbelievably nonsensical take on why rich people don’t have inordinate political influence, read this opinion piece from the Washington Post Outlook section—naturally—by Darrell M. West of Brookings. He writes, for example, “Conservative financiers didn’t defeat President Obama in 2012, despite spending hundreds of millions of dollars to do so.” Note to West: There are plenty of billionaires who supported Obama.)

A political system that transfers wealth upward didn’t happen by chance, but was the willful creation, and decades in the making, of our corporate and political overlords.

The process began in the early-1970s, amid the twin political crises of Vietnam and Watergate and an economy showing signs of stagflation, when business began a campaign to smash the post-war agreement that tolerated unions and offered wages allowing millions of workers to join the middle class and, at the lowest end, escape poverty. Between 1947 and 1979, the share of income going to the top 1 percent fell by about 27 percent. Then the effects of the corporate campaign began to kick in. Between 1980 and 2012, the share going to the top 1 percent rose by 120 percent.

The corporate campaign created a political consensus that churns out business-friendly policies no matter which party is in power. It also changed the nature of government employment. Fifty years ago, people came to Washington drawn by a sense of public service, however they defined it, and they often stayed in the public sector over much of their careers. Now working in government is a brief way station on the road to better things. Many of those who come to DC with little wealth leave in a position to become rich, and those who come rich are able to become richer.

After he went to prison for bribing public officials, lobbyist Jack Abramoff claimed in his memoir, Capitol Punishment, that he controlled around 100 members of Congress. In addition to offering them and their staff free meals at his high-end restaurant, Signatures, Abramoff handed out luxury box tickets to sporting events and junkets to the world’s most exclusive golf destinations. But his most effective tactic was simply to float the suggestion to congressional staffers that he’d hire them when they left the Hill. Abramoff would then effectively “own” the staffer, who would perhaps even unconsciously start making decisions that benefited his future employer. “His paycheck may have been signed by the Congress, but he was already working for me, influencing his office for my clients’ best interests,” Abramoff wrote. “It was a perfect–and perfectly corrupt–arrangement.”

In this environment it’s misleading to use the term “revolving door,” because that falsely suggests that there are sharp lines separating corporate America, government and the influence peddling complex.

Linda Daschle stands with her husband, Tom Daschle.

For the political class, cashing in doesn’t require brains, hard work, dedication or talent, but merely a willingness to sell to the highest bidder the Rolodex you compiled while in government. That brings me to a topic I’ve been writing about a lot, namely the incredible wealth being compiled by former politicians and hangers-ons, with a focus on their real estate holdings.

Over the past month or so, I’ve written about a former FBI director’s beachside penthouse (co-owned by his wife, and a client he “cleared” of wrongdoing), an Iraq War-financed McMansion, and a lavish Virginia property owned by a CIA torturer. I like writing about real estate because it’s hard to get people’s bank account records, but you can roughly track their wealth through their property holdings.

Consider, for example, Daschle, and his wife, Linda. Tom now lobbies for America’s biggest corporations but avoids registering (and disclosure laws) by calling himself a “strategic adviser.” He was Barack Obama’s first choice to be Secretary of Health and Human Services but had to withdraw due to a number of embarrassing ethical lapses, like failing to pay taxes on a chauffeured limousine provided to him by a friend and political donor. His second wife Linda, a former Miss Kansas, advertises herself more honestly and is considered to be one of the most powerful lobbyists in Washington.

The pair met in 1980 when Tom was a freshmen House member and Linda held a low-level position with the Civil Aeronautics Board, which is supposed to help regulate the airline industry. He had stopped by her office as part of a congressional visit and wedding bells rang swiftly (as soon as Tom dumped his first wife, who in 1978, according to this story in Washington Monthly, “had helped him ring 40,000 doorbells and go on to unseat an incumbent by 14 votes”).

Soon after their marriage, Linda landed a lobbying job with the Air Transport Association and in 1993 Bill Clinton appointed her to a senior position at the FAA. Four years later she tired of public service and returned to lobbying (at a firm founded by former senator Howard Baker).

Linda emerged as a lobbying powerhouse by representing clients (mostly aviation firms), whom her husband helped out while in the Senate. For example, she helped American Airlines get bailouts, even after the carrier had worked to “water down safety and security regulations that might have helped foil the World Trade Center attacks.” There’s no way to track Linda’s lobbying income, but she’s assuredly a mega-millionaire in her own right.

When Tom was a senator the couple owned a comfortable home in DC, but in 2011 they bought the seven-bedroom house at 2830 Foxhall Road NW. The year before, the Daschles bought two plots of land for $1.3 million in Bluffton, South Carolina, near the resort town of Hilton Head Island. By 2013, they had started building a house on them. It’s a perfect spot for this ardent champion of the “common man” and his superlobbyist wife. Bluffton has been proudly described by southernnationalist.com as the Antebellum birthplace of Southern secession that made its name by “embracing inequality as a positive good and rejecting democracy as a destructive evil.”

Representative Richard Baker, a Democrat from Louisiana.

Baker long served on the House Banking Committee and chaired a subcommittee that was supposed to police Wall Street, but instead worked to repeal the Glass-Steagall Act, which was passed during the Great Depression and separated commercial and investment banking. This was Wall Street’s wettest dream and led directly to rapid consolidation of the financial industry and the economic crash of 2008 that cost Americans $22 trillion and left millions unemployed and in foreclosure.

As a token of gratitude for such service, the financial industry contributed nearly $1.6 million to Baker’s congressional campaigns; his three single largest career donors were JPMorgan Chase, the American Bankers Association and Bank of America.

Baker resigned in 2008 and moved directly to Wall Street’s payroll as chief lobbyist for the Managed Funds Association (MFA), the voice of the hedge fund industry. Since then Baker has helped his patrons defeat stricter regulation of derivatives trading and higher taxes on hedge funds and their executives.

Enriching Wall Street firms (like JPMorgan, which sits on the MFA’s board) and destroying the American middle class has netted big returns for Baker. By congressional standards he was poor when he left office; financial disclosure forms show his total net worth at the time was $75,000 and that his biggest single asset was K’s Louisiana Market, his wife’s catering firm. Back then he resided in a modest home in Baton Rouge.

Life improved dramatically when Baker went to work for the Managed Funds Industry. According to the group’s latest IRS tax filing, he took home $2.3 million in 2011, which included a bonus of $700,000 and represents a 1,500 percent raise from his tawdry congressional salary of three years prior.

While Baker cleaned up, his financial sponsors were systematically ripping off his former constituents. For example, in 2012 Wells Fargo—a major campaign contributor to Baker and member of the MFA—settled a federal housing discrimination complaint over charges that it had allowed properties it foreclosed upon in minority neighborhoods of New Orleans to fall into neglect and disrepair, while carefully maintaining its stocks of foreclosed homes in white neighborhoods (Wells Fargo, as part of the settlement, agreed to pay $234.3 million in relief and compensation).

Such Louisiana woes don’t appear to have affected Baker. He currently owns three properties in his home state, among them a waterfront lot. (The real estate advertisement for the lot read: “Are you looking for the ultimate in elegant, private, and classy river front property but haven’t found it yet? Stop!!!!”). He paid $237,000 for it, a mere month’s pay on his current salary. It’s not a mansion, but it does come with room to dock two forty-foot boats.

But don’t worry–the “Waterfront Sanctuary” isn’t Baker’s most impressive property. In 2010, already flush with hedge fund cash, he bought a shiny new home in Baton Rouge for $2.27 million.

Coming next on House of Cards: Code Ridge

[Author’s Note: I’ve been writing about these issues for a very long time. Some parts of the above were adapted from my prior articles, which have appeared previously in Harper’s, and other publications.]

Photo: David Zalubowski/AP; Stephanie Green/Bloomberg/Getty; Dennis Brack/Bloomberg/Getty