Bush's Steps to Wealth
By PAUL KRUGMAN
Why are George W. Bush's business dealings relevant? Given that his aides
tout his "character," the public deserves to know that he became wealthy
entirely through patronage and connections. But more important, those
dealings foreshadow many characteristics of his administration, such as its
obsession with secrecy and its intermingling of public policy with private
interest.
As the unanswered questions about Harken Energy pile up — what's in those
documents the White House won't release? Who was the mystery buyer of Mr.
Bush's stock? — let me now turn to how Mr. Bush, who got by with a lot of
help from his friends in the 1980's, became wealthy in the 1990's. He
invested $606,000 as part of a syndicate that bought the Texas Rangers
baseball team in 1989 — borrowing the money and repaying the loan with the
proceeds from his Harken stock sale — then saw that grow to $14.9 million
over the next nine years. What made his investment so successful?
First, the city of Arlington built the Rangers a new stadium, on terms
extraordinarily favorable to Mr. Bush's syndicate, eventually subsidizing
Mr. Bush and his partners with more than $150 million in taxpayer money. The
city was obliged to raise taxes substantially as a result. Soon after the
stadium was completed, Mr. Bush ran successfully for governor of Texas on
the theme of self-reliance rather than reliance on government.
Mr. Bush's syndicate eventually resold the Rangers, for triple the original
price. The price-is-no-object buyer was a deal maker named Tom Hicks. And
thereby hangs a tale.
The University of Texas, though a state institution, has a large endowment.
As governor, Mr. Bush changed the rules governing that endowment,
eliminating the requirements to disclose "all details concerning the
investments made and income realized," and to have "a well-recognized
performance measurement service" assess investment results. That is,
government officials no longer had to tell the public what they were doing
with public money, or allow an independent performance assessment. Then Mr.
Bush "privatized" (his term) $9 billion in university assets, transferring
them to a nonprofit corporation known as Utimco that could make investment
decisions behind closed doors.
In effect, the money was put under the control of Utimco's chairman: Tom
Hicks. Under his direction, at least $450 million was invested in private
funds managed by Mr. Hicks's business associates and major Republican Party
donors. The managers of such funds earn big fees. Due to Mr. Bush's change
in the rules, these investments were hidden from public view; an employee of
Utimco who alerted university auditors was summarily fired. Even now, it's
hard to find out how these investments turned out, though they seem to have
done quite badly.
Eventually Mr. Hicks's investment style created a public furor, and he did
not seek to retain his position at Utimco when his term expired in 1999.
One last item: Mr. Bush, who put up 1.8 percent of the Rangers syndicate's
original capital, was entitled to about $2.3 million from that sale. But his
partners voluntarily gave up some of their share, and Mr. Bush received 12
percent of the proceeds — $14.9 million. So a group of businessmen,
presumably with some interest in government decisions, gave a sitting
governor a $12 million gift. Shouldn't that have raised a few eyebrows?
All of this showed Mr. Bush's characteristic style. First there's the
penchant for secrecy, for denying the public information about decisions
taken in its name. So it's no surprise that the proposed Homeland Security
Department will be exempt from the Freedom of Information Act and from
whistle-blower protection.
Then there's the conversion of institutions traditionally insulated from
politics into tools for rewarding your friends and reinforcing your
political control. Yesterday the University of Texas endowment; today the
Federal Energy Regulatory Commission; tomorrow those Social Security
"personal accounts"?
Finally, there's the indifference to conflicts of interest. In Austin,
Governor Bush saw nothing wrong with profiting personally from a deal with
Tom Hicks; in Washington, he sees nothing wrong with having the Pentagon
sign what look like sweetheart deals with Dick Cheney's former employer
Halliburton.
So the style of a future Bush administration was easily predictable, given
Mr. Bush's career history.
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