The Power Couple of California

On January 20, 1980, in San Francisco, California, finance capitalist Richard C. Blum (born in 1936) and the ambitious Democratic Party politician Dianne Feinstein (born 1933) were married in a ceremony at San Francisco City Hall. This marriage created an economic and political alliance that in little over a decade would allow them to become the top power couple in the state of California with a place on the national and world stages. They remain at the pinnacle of power today—he as a billionaire financier, speculator, real estate executive, and deal maker; she as the senior Senator (California’s highest federal official) from the largest and most powerful state in the U.S. They exemplify power as it is now wielded in the higher circles of the class system of the U.S. and illustrate the dismal results of a system best characterized as a plutocratic kleptocracy, completely lacking in authentic democracy, operated by and for corporate racketeers.


With his boundless greed after profitable deals, Blum is finance capital personified, while Feinstein illustrates the corrupt, war-mongering, pro-corporate politicians who inhabit the upper reaches of the U.S. ruling class. But to fully comprehend their rise to power, vast wealth and socio-political stance, one needs to understand the key developmental trends in the U.S. and world political economy during Blum-Feinstein’s rise during the last few decades. Five interrelated waves of our age will be discussed here:


  • The financialization of capital accumulation
  • Neoliberal corporate ideology
  • Imperialism, militarism, and war
  • Increased corporate domination of politics
  • The deepening global ecological crisis
  • Financialization of Capital Accumulation


One of the key aspects of any capitalist system is how capital is accumulated. Historically, the usual way is to combine human labor with raw materials and machinery to produce commodities, then sell the commodities at a profit (accumulating capital), then repeat this process of production to accumulate more. In mature capitalist economies like the United States, however, there is so much capital already accumulated and so much productive property already existing that sectors of the economy where commodities can profitably be produced and sold are limited. For many decades, capitalists have been trying to keep the system going by adding technologies and speeding up the pace of work to increase production while cutting wages and the number of workers needed to produce a given amount of a commodity. The result is excess capacity, increased debt, overproduction, a falling rate of profit, and stagnation, reflecting the key fundamental contradictions of capitalism. This increases the tendency of people with capital to accumulate capital by buying and selling (speculating in) stocks, precious metals, and other commodities, as well as entire companies—anything, in fact, that can be sold at a higher price after holding the asset for some length of time (a few minutes to months or years).


This tendency or trend is best labeled the financialization of accumulation. No production is involved, simply speculation, usually called “investments,” in the mainstream media. Finance capital creates nothing, rather it takes into its own hands the surplus value created by others at home and abroad. The speculation involved in taking this value from its human creators can be very complex and difficult to understand (credit default swaps, private equity deals, derivatives, hedge funds, commodity trading, leveraged buyouts, arbitrage etc.) or be straightforward purchases of assets or entire companies to merge them into a bigger entity. Following such purchases, the new owners typically increase the exploitation and alienation of workers in order to raise profits. Such speculative activity can lead to stagnation, economic crisis, and the danger of economic collapse when the people doing the speculating guess wrong about price increases or decreases. When such a crisis occurs, as happened in 2008, governments typically bail out the wealthy speculators, leaving the bill to be paid by rank and file workers/taxpayers.


One measure of how pervasive the “casino economy” of speculation has become in recent decades is illustrated by statistics from the Bureau of Economic Analysis of the U.S. Department of Commerce. This Bureau has statistical breakdowns on total U.S. domestic corporate profits (including corporations in utilities, manufacturing, financial, transportation, wholesale and retail trade). In 1946 financial profits as a percent of total domestic corporate profits was only 1.2 percent. By the first quarter of 1955 this figure had jumped to 11 percent. It remained roughly in this range until the 1980s, when financial corporate profits as a percent of total corporate profits began to rise sharply. By the first quarter of 1985 it was up to 14.1 percent, jumping to 23.5 percent by the first quarter of 1995. It reached a peak of 40.9 percent in the first quarter of 2003. It has retreated from that high point since then, with financial profits as a percentage of total domestic corporate profits standing at 27.4 percent in the first quarter of 2009, for example. In contrast, manufacturing profits as a percent of total corporate profits has dropped from a higher level to 28.2 percent in the first quarter of 1995, then to only 7.8 percent in the first quarter of 2003, rising to 14.0 percent in the first quarter of 2009, still only about half of the financial profits for that quarter.


In the U.S. the wealth and income statistics are truly shocking, illustrating both the gross injustice of the situation and that the entire social and political order is declining. The top 1 percent of U.S. wealthholders, Blum and Feinstein among them, currently hold about 35 percent of the total wealth of the nation (43 percent of the financial wealth), and the top 20 percent have 85 percent of the total wealth.


Conversely, the bottom 80 percent of the population owns only 15 percent of the wealth, the bottom 40 percent of the population owns only 0.3 percent of the nation’s wealth (basically nothing), and about one in six Americans (almost 50 million people) live in poverty, with no wealth and lacking even a minimal income. The 2010 census recorded the widest gap between rich and poor ever recorded in U.S. history. The 400 richest families now have more wealth than the poorest 57 million families (about 145 million people). In terms of income, the top 1 percent receives over 21 percent of the income, and the top 20 percent gets 61.4 percent. Conversely, the bottom 80 percent get only 38.6 percent of the income and the bottom 20 percent receive only a shocking 3.4 percent of the income.


For Blum-Feinstein, we can see what being in the top 1 percent means. They currently own a private jet, a Gulfstream G650, “the gold standard in business aviation.” Blum-Feinstein also own an entire 161-room San Francisco hotel (The Carlton) and at least 6 other homes, including a Pacific Heights (San Francisco) mansion purchased a few years ago for a reported $16.5 million, another a ski retreat on a 30-acre parcel of land in Aspen, Colorado, built in 1999 for $7.4 million. Their house in Washington, DC is a French Renaissance-style dwelling located near American University bought a few years ago for “nearly $6 million.” They also own a beachside house in an exclusive gated community (94.9 percent white) at Stinson Beach north of San Francisco. Their other two properties are condos at Lake Tahoe in California’s Sierra Nevada Mountains, and Kauai, Hawaii. At a low estimate, including their hotel, their personal real estate holdings, together with their private jet, are likely worth well over $100 million.


Feinstein-Blum’s real estate and private jet holdings are just the beginning. Blum’s empire began with his ownership of Blum Capital Partners, a firm he founded in 1975. In its 2005 edition, one standard industry source, Pratt’s Guide to Private Equity Sources, lists Blum Capital Partners as having $1.5 billion under management. Two other more recent sources list the assets of Blum Capital at the higher levels of $2.8 billion and $4.5 billion. Blum’s firm’s clients reportedly include some of America’s wealthiest people and largest corporations, like oil heir Gordon Getty and Bank of America. Blum Capital Partners also has a joint venture with a much larger firm, the Texas Pacific Group (TPG), which had a total of $53.4 billion under management as of 2010. Blum Capital established Newbridge Capital to conduct this joint venture, which has had as much as $3.2 billion under management. Blum has been a co-chair of both Newbridge and TPG.


Some of Blum’s notable investments have included the real estate firm of CB Richard Ellis, Career Educational Corporation, ITT Educational Services, Lenovo, Fair Isaac, Northwest Airlines, URS, Perini and DHL Airways. Blum has been the chair of the Board of CB Richard Ellis since 2001. He reportedly owns a 15 percent controlling interest of this giant firm, widely considered to be the largest real estate firm in the world with about 28,000 employees working in over 300 offices in 50 nations and annual revenues in the billions. A Los Angeles Times article (November 1, 2006), stated that CB Richard Ellis was worth $6.7 billion, making Blum’s 15 percent worth about $1 billion at that time. Varied sources report that Blum’s investment in CB Richard Ellis amounts to less than one-third of his total portfolio, making his likely wealth level over $3 billion. Another investment is in China-based Lenovo, which was reportedly the fourth largest vendor of personal computers in the world in 2009 with assets of almost $9 billion and revenue of $16.6 billion. It has operations in North Carolina (a largely non-union state), as well as in China, Japan and Singapore. Blum sold his holdings in URS and Perini after negative publicity having to do with his wife’s votes in the U.S. Senate, a topic discussed below.


Neoliberal Corporate Ideology


Gross class inequality has been made worse by a second wave of anti-government neo-liberal ideological hegemony. Neo-liberalism is a version of extreme free market thinking, putting forth the pure logic of capital. This ideology’s aim is to cripple government’s power to serve the people’s interest, leaving the road open to total corporate domination. Neo-liberalism’s critique and actions aim not only at ending the regulatory and welfare states, it wants to shrink government’s role in economic and political life down to the point where the wealthy corporate ruling class will totally control economy, society, and political life with no interference.


Long theorized by right-wing thinkers, neo-liberalism came into vogue during the 1980s as a way to open up new markets to accumulate in order to overcome the economic stagnation characteristic of that time, similar to what has been happening again in recent years. The partial privatization of government-run programs such as education (undermining public education through budget cuts, private schools, charter schools, and voucher programs for example); outsourcing of traditional government run sectors such as prisons; “health care” laws that legally force people to buy high cost health care from monopoly corporations (insurance and drug companies as well as hospitals) or pay a fine are all examples of corporate controlled government opening up new markets for the capitalists to conquer.


Neo-liberalism as an ideology is completely hypocritical, however, because virtually all of the government welfare, sweetheart contracts, tax cuts, subsidies, and bailouts given to major corporations continue under neo-liberal governance, only the Keynesian-type benefits to rank and file workers are cut. In actual practice, therefore, it is a philosophy meant to make workers and their unions pay for the crisis tendencies of capitalism, making the capitalist crisis actually a working class crisis. Workers and their families are forced to take cuts and sacrifice to make the corporate capitalists whole. Under corporate neo-liberal thinking over the past 30 years, all aspects of the New Deal reforms of the 1930s have been under attack, with even the most popular of these reforms, Social Security, now being undermined and put on the table for eventual destruction as an “entitlement” which must be cut. This, in spite of the fact that recipients of Social Security have steadily paid into the fund through their taxes, usually for many decades.


Blum and Feinstein’s policies and actions promote this aspect of neoliberialism. Blum’s field of operation is worldwide, exporting jobs overseas to capture surplus value in areas of the world that are expanding rapidly at a time when there is stagnation in mature capitalist economies. As mentioned above, Blum’s foreign investments have focused on Asia, including China, Australia, and Korea, often through TPG and Newbridge Capital.


Feinstein and Blum are also major investors in two private educational corporations, the Career Educational Corporation and ITT Educational Services. At the same time, Blum donated heavily to the political campaigns of California Governor Gray Davis, amounting to at least $75,000 in a two-year period beginning in about 2000. As a result, Davis, following his “pay to play” politics, appointed Blum to be a member of the University of California Board of Regents. Within a few years, Blum became the chair of this Board and the “alpha dog” of the group according to one newspaper report (San Francisco Chronicle April 14, 2008).


Blum led the Board while it raised tuition for university students again and again, increases that amounted to 32 percent in one year. Students have had to take out massive loans to attend school. One source indicates that the amount of debt loaded on all U.S. students has jumped from $90 billion in 1999 to $550 billion in 2011. Peter McLaren, a University of California Los Angeles professor of education has stated that “The UC system is on the rocks” due to no longer being affordable. As students were priced out of an expensive public university system, the inferior, privately operated correspondence type diploma mills where Blum had major investments became increasingly attractive. Not to be left out of the drive to weaken public education and teachers’ unions in order to open space for private capital accumulation, Feinstein had become a supporter of school vouchers by 2003, undermining public schools by allowing parents to use public money to pay for tuition at private or parochial schools in Washington, DC (San Francisco Chronicle July 23, 2003).


A final aspect is cutting taxes on the wealthy and, of course, Feinstein consistently favors such cuts. One example is Feinstein’s support for phasing out inheritance taxes on large estates. In July 2000, she was one of a small group of Democratic Senators defending and voting for a Republican-sponsored bill to repeal an estate tax law first passed in 1916, a law that applied to only the top 2 percent of taxable estates. In short, it was another benefit promoted by Feinstein that exclusively helped her own and other super-rich ruling class families.


Imperialism, Militarism, and War


A third wave of our age is the interrelated issue of imperialism, militarism, and war. The stagnation tendencies of highly capitalized nations like the U.S. are partly overcome by military spending and economic expansion abroad. Much of U.S. foreign policy, in all of its aspects, is focused on fostering this expansion. The imperialist policies to be followed by the U.S. and NATO are discussed and developed by the leading U.S. private—but closely connected to official circles—think tanks and policy forming organizations, such as the Council on Foreign Relations (CFR) and the Brookings Institute. A similar organization, international in membership, is the Trilateral Commission, which draws its members from many countries in Europe, North America, and Asia. Blum-Feinstein are closely connected with all three of these private foreign planning organizations and their imperialist policies as both Blum and Feinstein have been members of the CFR for a number of years (membership is by invitation only). Blum has also been a trustee and part of the power structure of the Brookings Institute for years (Brookings regularly hosts the “Brookings-Blum Roundtable” discussion series) and Feinstein currently serves on the North American branch of the Trilateral Commission, after having first become involved with this organization in 1988. One result of these close connections is the fact that Feinstein is an enthusiastic war hawk and strongly supports all the current wars and occupations of U.S. imperialism, from Iraq and Afghanistan to Libya.


Feinstein also chairs the Senate Intelligence Committee. She approved of the appointment of General David Petraeus to head the CIA, saying that she had “enormous respect” for him, and that the U.S. should “…put all of our eggs in the Petraeus basket….” This illustrates that Feinstein has embraced the dangerous and illegal new method of warfare now being waged by the CIA under Petraeus. This new way of war is to send drones over borders to kill thousands of people—even U.S. citizens who are viewed as enemies, but whose guilt has not been legally proven—as was recently the case with the drone assassinations of Anwar al-Awlaki and Samir Khan in Yemen.


The setting of the precedents that national sovereignty, due process for suspects of a crime, Congressional responsibility to declare war, and the traditional distinction between civilians and military actors (the CIA is a “civilian” agency, yet it is openly conducting war operations, drone bombings which frequently kill civilians in other nations, making the CIA operators “unlawful combatants,” operating outside the laws of war) do not matter—could well turn out to be a disaster.


Increased Corporate Domination of Politics


A fourth wave is the ongoing corporate takeover of the U.S. political system and the consequent serious decline of a functioning democracy. American democracy has now been completely conquered by American capitalism and, whatever the issue, the rich win. To be sure, corporations and the capitalists that own and control them have long amounted to a ruling class running most aspects of the U.S. political economy. There were, however, often some countervailing powers, such as unions willing to strike and struggle, along with other organized movements, such as civil rights, anti-war, women’s rights, etc., that sometimes had significant political successes through direct action. The federal government would also sometimes side with the people to stop the worst corporate abuses and promote the general welfare. There were also some limits—often violated in practice but nevertheless had some effect—in the amounts of money that the corporate ruling class could put into political campaigns.


In recent decades, however, the level of corporate domination of American politics has clearly increased. The pathways to intensified corporate control have been through the candidate selection process, campaign finance, massive lobbying, favorable media coverage to corporate ruling class linked candidates, expert advisers from ruling class think tanks and vote rigging through exclusion of people and through computers. Corporations claiming to be human beings can now purchase unlimited “free speech,” while real citizens are often denied such rights by their relative poverty, lack of access to media, or by police repression. Collectively, this has resulted in making the U.S. political system mostly a managed “democracy,” in other words, a show conducted to make the rank and file believe that there is a real measure of democracy in the system.


The Democratic Party plays a key role in this legitimization of the system, especially this party’s more liberal wing, a main headquarter of this wing being the San Francisco Bay Area of California, the home area of Blum and Feinstein. They are key players in what can best be called the San Francisco Democratic Party political machine, a machine that has spawned corporate-connected political misleaders who hold or have held important state and federal offices, like Nancy Pelosi, Jerry Brown, Barbara Boxer, John Burton, Willie Brown, Gavin Newsom, and Kamala Harris. Capitalists like Blum and wealthy heirs like Gordon Getty are among the primary fundraisers for these politicians. Feinstein and Blum are the godmother and godfather of this group, standing at the center of this circle of power connecting these and other key crony capitalist Democratic Party officeholders. To cite just two examples, Feinstein conducted Brown’s wedding (to a former Vice President of the Gap) where the entire Bay Area political machine was present, and hosted a wedding shower for Newsom at her Pacific Heights mansion, illustrating her close personal, economic and political ties to key members of this group. The group obviously also has important national level connections, to cite but one example, former Vice President Al Gore is a long-time friend and business partner of Blum.


While pretending to represent the interests of the rank and file, once in office, Feinstein and other politicians pay off their partners with policies favorable to their interests, including government contracts. Senator Feinstein, who was already in October 1994 called “…the most prolific fund-raiser among all federal candidates” by the Los Angeles Times (October 28, 1994), has received large campaign donations (in the thousands) from a truly amazing list of top California and national level corporations, including:


A.G. Spanos Companies, ATT, Atlantic Richfield, Bank of America, Bankers Trust, Bayer, Bechtel, Bellsouth, Blue Diamond Growers, Blue Shield, BNSF Railroad, Boeing, British Petroleum, Calpine, Cargil, Charles Schwab, Chevron, Cisco Systems, Citigroup, Clear Channel, Clorox, Coca-Cola, Comcast, Edison International, Eli Lilly, Gap, Genentech, General Atomics, General Dynamics, General Electric, Goodrich, Hewlett Packard, Honeywell, Intel, ITT, JP Morgan Chase, Johnson and Johnson, Lockheed Martin, Matson Navigation, Met Life, Microsoft, National Association of Realtors, National Venture Capital Association, News America Holdings (Fox Political Action Committee), Northrop Grumman, Occidental Petroleum, Oracle, Pacific Life, Insurance, Parsons Brinckerhoff, Pfizer, PG&E, Pillsbury Winthrop Shaw, Pricewaterhouse Coopers, Qualcomm, Raytheon, Safeway, Sempra Energy, Sony Pictures, Tenet Healthcare, Time Warner, Travelers, Union Pacific, Unionbancal, United Airlines, UPS, Verizon, Viacom, Visa, Walmart, Walt Disney, Wells Fargo.


This list of donors has led to the assertion by close observers that Feinstein is the “best Senator that money can buy” and that her life and career has “always been about money” (Larry Bensky, East Bay Express, November 18, 1994). She was the daughter of a wealthy doctor, educated at elite private schools, including Stanford University, and spent her way to political power, breaking records for campaign fundraising and spending beginning with her early campaigns for the San Francisco Board of Supervisors. Born to wealth, she married even more of it. Serving the wealthy, first and foremost herself and her husband, has marked her career. As the Los Angeles Times (October 28, 1994) expressed after observing only her actions for only a short time in office: “A review of the senator’s first two years in office found that Feinstein supported several positions that benefited Blum, his wealthy clients and their investments. She was a vocal proponent of increased trade with China while Blum’s firm was planning a major investment there. She also voted for appropriations bills that provided more than $100 million a year in federal funds to three companies in which her husband is a substantial investor.”


In 2007 investigative reporter Peter Byrne published a series of reports that showed that her actions in the early 1990s were only the beginning of Feinstein’s aiding her husband’s firms. As chairperson of the Senate’s Military Construction appropriations subcommittee from 2001-2007, Feinstein supervised and supported the appropriation of over $1.5 billion for two military contractors, URS Corporation and Perini Corporation, both companies that Blum had a controlling interest in. Blum later sold URS for a reported personal profit of $57 million. When Feinstein’s actions were exposed in early 2007, she abruptly quit her post on this subcommittee, apparently recognizing that the ethical and legal issues involved could damage her politically. Unfortunately, the existing laws, combined with Feinstein-Blum’s political power, made a serious investigation and possible prosecution of such corruption impossible.


Blum returns the favor, raising more money for his politician wife than any other individual. He arranges contributions and loans to her campaigns in the millions, and in the 1994 campaign he stated that he was spending “26 of every 24 hours” to get his wife re-elected (Los Angeles Times, October 24, 1994). Sometimes this got the power couple into trouble, even with the weak campaign finance laws that exist. In Feinstein’s 1990 campaign for Governor for example, she failed to disclose a series of bank loans arranged by Blum that amounted to at least $2.9 million. Her campaign was fined a total of $190,000 by California’s state watchdog agency, the largest such cash settlement in state history, for an “outrageous case of gross negligence” (Los Angeles Times, December 22, 1992).


As is the case on every other key question involving our collective future, Feinstein has been, and is, on the wrong side. In a 2011 editorial, the San Francisco Chronicle (May 26, 2011) called her “one of the biggest cheerleaders for renewing…” Bush’s PATRIOT Act. The Chronicle said that Feinstein and other supporters of renewal were going “too far” and were “erasing bedrock guarantees” of the Constitution. In 2007, she voted for immunity for telecommunications companies who illegally spied on their customers. Some of these companies, such as ATT, were also heavy donors to her political campaigns. As chairperson of the Senate Intelligence Committee, she also recently criticized the CIA for not spying enough on the Egyptian people, stating that, “the CIA should have monitored Facebook more closely.”


A Deepening Global Ecological Crisis


A final wave of our age is the ongoing and accelerating global ecological crisis. This crisis is deeply rooted in the anti-ecological imperatives of capitalist production and exchange for profit and accumulation. This is largely because the fundamental problem is the capitalist system itself and no corporate-funded politician or appointed official will risk his or her career to raise questions about and deal with fundamental causes. So, in order to assure everyone that the crisis is being handled in an appropriate way, a public relations show is put on by corporations and governments, pretending to face up to the moral and practical challenge of humans living in a sustainable way.


The political and economic activities of Blum and Feinstein routinely undercut ecological needs in favor of the accumulation of wealth and power. One example is Feinstein’s relationship to wealthy corporate farmer Stewart Resnick, the owner of over 100,000 acres of prime farmland in the San Joaquin Valley. He has written big check after big check to her political campaigns. Over the past few decades, he has also given several million dollars to the Democratic and Republican Parties and their candidates. Then, when Resnick called Feinstein in 2009 to weigh in on the side of corporate agribusiness in a drought-fueled ecological dispute over water to big landowners or water for the Sacramento-San Joaquin River Delta’s ecological needs, Feinstein jumped in, pushing the agribusiness viewpoint onto two Cabinet-level secretaries and calling for a sweeping review of the science to allow more water to go to Resnick and other big operators. Due largely to excessive water diversions, the Delta’s ecology is in serious trouble, with fish populations in catastrophic decline. Jim Metropulos, a Sierra Club leader representing an organization that always endorses Feinstein and almost always backs Democrats in every election, stated that “it is very disappointing that one person can make this kind of request, and all of a sudden he has a senator on the phone, calling up (Interior Secretary) Salazar.” Would it be too much to hope that the Sierra Club would learn from this and other examples and draw appropriate conclusions about Feinstein and the Democratic Party?


Blum and Feinstein also favor and work for “wilderness,” she in the Senate sponsoring legislation to set aside public lands as preserves, and he as a member of the Governing Council of the Wilderness Society. The nature and politics of Blum’s Wilderness Society can be seen by looking at its Governing Council and one of its “corporate partners.” The Governing Council is filled with the super-rich like Blum and includes a member of the Getty oil family, a member of the Roosevelt family, a Rockefeller family in-law, a Texas Pacific Group private equity billionaire, an adviser to Clinton-Gore White House and a past chairman of Recreational Equipment Company, which sells products for outdoor activities. Its leading corporate partner is Bank of America, which for years financed mountain top removal to mine coal by Massey Energy and International Coal Group. A leader of the Rainforest Action Network correctly called this a “barbaric form of resource extraction,” an activity that, through the Bank of America, was profiting the Wilderness Society.


Recently, under the pressure of direct action against it, the Bank of America cut back on—but did not end—such financing. The Blum- Feinstein-Wilderness Society approach of creating a few islands of non-development in a sea of life-destroying capitalist ecocide is clearly inadequate as a strategy of ecological and human survival. What is required is for us to envision what a rational, egalitarian, life-affirming economy and society would look like and struggle to bring that system into reality. 


The five interrelated waves of our age, and Blum-Feinstein’s role, illustrate that the Democratic Party and its leaders are every bit against the people’s interest as the Republican Party. Both favor the corporate state and capitalist austerity, imperialism, war and capitalist ecoside. Blum-Feinstein stand solidly for the financialization of accumulation and the private use of this wealth to benefit a small group of wealthy owners (the 1 percent); they stand for neoliberal ideology; for imperialism, militarism and war; for undemocratic corporate political rule; and for weak and inadequate measures to confront the ecological crisis. Only the mass mobilization and direct action of the people can save the vast majority of us from the insatiable greed of a capitalist class and capitalist system as exemplified by the likes of Richard C. Blum and Dianne Feinstein.


Historian, author, and activist Laurence H. Shoup lives in Oakland, California. His most recent book is Rulers and Rebels: A People’s History of Early California, 1769-1901.