In a blistering, five-page missive published by CNBC on Thursday, former hedge fund manager and economic pontificator Leon Cooperman voiced the concerns of many people on Wall Street and in the finance industry, when he declared that Elizabeth Warren’s campaign was maligning self-made rich people in order to score cheap political points.
Cooperman, who is chairman and CEO of New York City-based Omega Advisors, derided Warren’s idea for a wealth tax—an idea “whose efficacy has widely been debunked,” Cooperman writes—but more broadly, he said the Massachusetts senator was overly focused on the problem of income inequality, when a more effective area for policymakers is to expand income opportunity instead.
Though the letter seems to be written with the goal of fueling yet another round of cable news chatter, it also illustrates, in incredibly direct terms, the ongoing feud between Wall Street and Warren. And it comes at a moment in the campaign when Warren has just placed first in a new poll of likely Iowa caucus voters.
The dispute has deep roots.
Warren got her start on the national stage when, as a Harvard Law professor, she researched bankruptcy reform, ultimately advocating for reforms that banks and credit card companies opposed. When the financial crisis happened in 2007, she famously conceived of the Consumer Financial Protection Bureau to serve as a federal watchdog of lending and banking activities.
In the Senate, Warren called for big banks to be further regulated in part by restoring or updating the Glass-Steagall Act, a set of banking restrictions that were repealed in 1999 under President Bill Clinton and that led to more efficient flows of capital but also a dramatic, sometimes destabilizing financialization of the economy.
More recently, Warren has threatened Corporate America by taking on Big Tech, describing companies like Amazon, Facebook, and Google as monopolies and vowing to pursue their breakup. She has tweaked them on the role social media plays in elections, as well.
In a pointed Facebook ad that has since gone viral, Warren falsely claimed that Facebook and its CEO Mark Zuckerberg were supporting President Donald Trump. The point, of course, was to vividly critique Facebook’s policy of allowing candidates to run false and misleading political ads.
In September, when CNBC host Jim Cramer said Wall Street executives were freaking out over the prospect of a Warren presidency, Warren tweeted, “I’m Elizabeth Warren and I approved this message.”
This latest war of words began with a comment Cooperman made in an interview with Politico, in which he said of Warren’s populist rhetoric: “This is the fucking American Dream she is shitting on.”
In reply, Warren wrote that the billionaire owed his success to “the opportunities this country gave you” and therefore he ought to be fine with repaying society by way of higher taxes.
For Cooperman, Warren’s rebuke was too much.
“You proceeded to admonish me (as if a parent chiding an ungrateful child),” he replied testily. (You can read the full letter here.)
Having vented his spleen, Cooperman moves on to legitimate policy questions about entrepreneurial wealth creation and its role vis a vis economic growth. He noted that, according to the World Bank, many countries that have relative income equality—the list includes Afghanistan, Albania, Romania, and Slovakia—achieve that result by way of having stagnant economies and limited entrepreneurial innovation.
“Their citizens may be more aligned than most other countries in the fair distribution of wealth, but that does not translate in any meaningful sense into widespread prosperity,” Cooperman writes. “So what good is income equality to them?”
Cooperman also argues that Warren’s economic policy focuses too much on gross taxes versus net taxes, that its projections of future revenues based on a revised tax code are overstated, and that tax avoidance would be likely, which is why countries that have previously tried wealth taxes have ultimately moved away from them.
Cooperman’s argument is persuasive at times, though he is less compelling when he points to friends like Ken Langone, Michael Bloomberg, Arthur Blank, and Bernie Marcus, noting they have funded plenty of hospitals, university labs, and academic scholarships. With populism ascendant across the political spectrum, it feels a bit tone deaf to suggest that a person with naming rights on a business school library is not getting a fair enough shake.
Still, people in finance have always been threatened by Warren’s criticism, bristling in particular at the blame she assigns to them over the Great Recession. Finance types often argue that the Clinton and Bush administrations encouraged broader home ownership as a policy objective, ultimately driving people who lacked strong enough credit to overextend themselves, leading to the wave of foreclosures that tanked the economy.
Warren supporters would argue that the banks have shown no remorse over their culpability in the crash, which is precisely why they need stricter governmental scrutiny.
If Warren’s critics, like Cooperman, didn’t like her policy agenda before, they won’t like it any more now that she has released a comprehensive explanation of how she would fund Medicare for All—to the tune of $20.5 trillion dollars. The funding plan she published is complicated but, among other things, Warren says she would double her proposed wealth tax to 6%, up from 3%, raising $6 trillion. She would also gain $2.3 trillion through more aggressive tax enforcement.
As Warren takes her Medicare for All plan on the campaign trail—and if it helps her cement her status as a frontrunner—you can expect more counterpunches from Wall Street. And this may be Warren’s strategy.
Getting into a public fight with a hedge-fund billionaire only enhances Warren’s positioning as a champion of working people. It’s possible she’ll alienate voters by being seen as too anti-business, but that’s a risk she’s been willing to take for a long time—and for the most part it has paid off for her.
The lesson here may well be that while telling off a presidential candidate at length is certainly gratifying, it may not be the shrewdest politics. Then again, when you are worth north of $3 billion, you may not care.
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—How Mitch McConnell could use impeachment to scramble the Democratic primary
—Sherrod Brown has some advice for 2020 candidates hoping to win in Ohio
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