Monday, 4 January 2021

And here is some more of the story - how the rich get power and how the government is corrupted

 Jun 25, 2013 15:36:47 (ET)

WASHINGTON (MarketWatch) -- Heiress Penny Pritzker has been confirmed by the Senate to be the commerce secretary, joining the ranks of other fabulously wealthy individuals who've held Cabinet jobs.

Pritzker's fortune is estimated at $1.85 billion, much of it inherited from her family's ownership of the Hyatt hotel chain and other real-estate holdings.

Pritzker's wealth didn't count against her in the Senate, which studiously avoided examining the grimier side of her investments and public record.

But her wealth certainly helped her to get the job, which has often been granted as a trophy to the president's most successful financial backer.

Pritzker may be a proud member of the Forbes 400 list of America's wealthy elite, but she isn't the wealthiest person to ever serve in the Cabinet.

On the following pages are the five richest people who have held a Cabinet job.

Averell Harriman held many government jobs from the 1930s into the 1970s, specializing in diplomacy with the Soviet Union. Along with five others dubbed the Wise Men, Harriman is credited with creating the Cold War policy of containment.

Harriman's financial dealings with top German companies and the connections he made in Russia before the Revolution made him a natural choice as a diplomat during the war. He attended most of the major conferences of the war, including Placentia Bay, Tehran and Yalta.

He served as commerce secretary from 1947 to 1948, but that was the least of his contributions. He was ambassador to the Soviet Union during World War II, and was ambassador to Britain following the war. He was the chief negotiator for the Nuclear Test Ban Treaty and led the U.S. delegation to the Paris Peace Talks with North Vietnam in 1969, narrowly missing the Nobel Peace Prize that went to Henry Kissinger.

Harriman earned his money the old-fashioned way: He inherited most of it from his father, E.H. Harriman, founder of the Union Pacific Railroad.

The rest of his wealth came the other old-fashioned way: shrewd investments. The bank he founded in 1922 was merged into the successful investment bank Brown Brothers Harriman & Co., which he ran until he joined the government.

Before Goldman Sachs, Brown Brothers Harriman was the real revolving door between Washington and Wall Street.

William C. Whitney came into his money via political connections and by marrying Flora Payne, the sister of Oliver Hazard Payne, one of John D. Rockefeller's close assistants and earliest investors.

Whitney started his career in New York City politics, where he helped to oust the corrupt Tammany Hall crowd from power. He was close to Samuel Tilden and Grover Cleveland.

He then used his political and social connections in a daring scheme to monopolize the streetcar system in New York, amassing a great fortune. He later diversified into tobacco, coal and land.

Whitney was very active socially, in New York and in Washington. During his tenure in Washington, he and his wife entertained an estimated 60,000 people. When the stodgy establishment opera company in New York refused to seat Rockefeller because he was an uncouth newcomer, Whitney and others founded the Metropolitan Opera.

Whitney didn't found the Whitney Museum of American Art, but his daughter-in-law, Gertrude Vanderbilt Whitney, did. Told you this guy ran in fast circles.

Like many others on this list, Pritzker inherited a fortune and built it up with some savvy investments. The seed of her fortune comes from the Hyatt hotel chain, which was founded by her grandfather, A.N. Pritzker.

Penny Pritzker founded PSP Capital partners and Pritzker Realty Group. Most of her holdings are in real estate. A bank she co-owned, Superior Bank, failed in 2001 due to unsound lending to subprime borrowers.

Following the 2008 financial meltdown, Pritzker aggressively invested in the mortgage-backed securities that no one else wanted.

She was one of President Obama's top fundraisers in his 2008 campaign. She didn't have a major role in the 2012 campaign, but she donated more than $100,000 to the campaign and gave $250,000 to the inaugural committee.

Jesse Jones is largely forgotten today, at least outside of Houston. But during the Great Depression, Jones was the chairman of the powerful Reconstruction Finance Corp., the main financial arm of the New Deal. Jones was known at the time as "the fourth branch of government," as his agency lent billions to restructure banks and to rebuild industry.

Jones earned his fortune in Texas real estate and banking and was also the owner and publisher of the Houston Chronicle.

Jones was a powerful political figure behind the scenes, nurturing the careers of Democrats such as Lyndon B. Johnson and John Connally.

Although Jones served under Roosevelt for years, FDR thought his political views were too conservative. FDR aborted a movement to get Jones the 1940 vice-presidential nomination.

Mellon, the richest member of this list, is still the most controversial, some 90 years after joining the Cabinet. Some conservatives say he was the best Treasury secretary since Alexander Hamilton; some liberals say his policies laid the groundwork for the Great Depression.

Along with brother Richard, Mellon took over his father's bank in the 1880s and built it into one of the most powerful institutions in the country. Mellon had a knack for investing in the people and ideas that would transform a nation: coal, steel, railroads, shipbuilding and petroleum. He helped to found Alcoa , Gulf Oil, Carborundum and U.S. Steel.

Mellon was the third-richest American of his time -- behind only John D. Rockefeller and Henry Ford -- and has been ranked the 14th richest American of all time, in inflation-adjusted dollars.

Mellon's greatest political achievement was cutting income-tax rates, with the top rate falling from 77% to 24%. Although rates were slashed, the government ran surpluses for 11 straight years, just as Mellon had predicted. It was the most successful experiment yet in supply-side tax cuts. He is credited with coining the term "trickle down" economics.

The economy boomed for most of Mellon's tenure at Treasury. Industrial production soared, and a mass consumer market flourished. But the period is also known for its excesses, and a widening of inequality of wealth and income. Mellon begat Gatsby.

When the Depression hit, Mellon famously advised President Hoover to let the economy heal itself. "Liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate," Mellon said. "It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people."

Hoover did not follow Mellon's advice, but his philosophy lives on today, whenever anyone suggests that nothing is to be done about our unemployment problem.

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