Arthur Levitt: Influence Peddler
Steinberg's attempt to take over Chemical Bank never reached fruition. But Levitt learned a valuable lesson: It is whom you know that is important. Thus, when Levitt eventually became Chairman of the Securities and Exchange Commission, Levitt utilized his political influence to protect his friends
Arthur Levitt is an influence peddler, who has always sought to smooth over violations of federal securities law.
Upon graduation from college and even with the influence of his father, Arthur Levitt Sr. who served as Comptroller of the State of New York for 24 years, Levitt Jr. was unable to obtain employment at a top rated firm such as Loeb Rhodes or Salomon Brothers.
After selling tax shelters involving cattle, Levitt was approached by the firm of Carter Berlind and Sandy Weill to become a partner.
Why, you might ask? The answer was simple. Berlind and Weill (Weill of Citibank infamy) had been advising the corporate takeover artists, such as Saul Steinberg, the Chairman of Leasco Dating Processing Equipment Corporation. Leasco was involved in renting IBM mainframe computers to businesses, thus obviating the need for these businesses to purchase IBM computers. This is a basic tax shelter, which is at the basis of the American economy. If a computer or office is leased, the payments are an expense item and these can be deducted from gross income. But if a computer or building is purchased, it then becomes an asset which must be depreciated over a long period of time-this in turn increases taxable income.
In 1968 Steinberg, a brilliant individual and corporate looter took over Reliance Insurance by using the highly overpriced stock of Leasco, which was trading at 150 times "creative" earnings. Berlind and Weill advised Steinberg on the takeover of Reliance Insurance Company, whose stock was undervalued. But Berlind and Weill had run into political flack for advising the rapacious Steinberg. So Berlind and Weill turned to Levitt, whose father was then Comptroller of the State of New York. Levitt's father was a typical career politician, who practiced old style clubhouse politics.
In 1969 Steinberg wanted to utilize the highly overpriced stock of Leasco to purchase Chemical Bank –now JP Morgan Chase—which at the time was the sixth largest commercial bank in the United States. There was uproar, because the politicians feared that speculative companies such as Steinberg’s would eventually be able to take over the banking industry in the United States by using the over priced stocks. The underlying fear was that all these banks could eventually collapsed having been purchased by worthless stocks. A law was passed in New York State that required bank takeovers to be approved by the State of New York.
Steinberg's attempt to take over Chemical Bank never reached fruition. But Levitt learned a valuable lesson: It is whom you know that is important.
Thus, when Levitt eventually became Chairman of the Securities and Exchange Commission, Levitt utilized his political influence to protect his friends: Weill, former Chairman of Citibank, which is a modern disaster and which without federal aid would have been insolvent; Alan Greenberg, former Chairman of Bear Stearns, which was insolvent; Maurice Greenberg, former Chairman of AIG, which was insolvent and which the federal government bailed out; Bernard Madoff, who stole $50 billion; etc. Levitt even protected one adversary, Louis Miceli, because if Miceli's criminal activity were exposed, Levitt's reputation would be ruined.
Levitt has always protected his friends- to the detriment of the country in which he resides, the United States.
As for Steinberg: Steinberg's mismanagement and looting of Reliance Insurance Company led to the largest insurance failure in the United States-until, you guessed it, AIG, which collapsed and has cost the federal government $150 billion so far.
As for Leasco, it never earned a profit- its fictional earnings were a product of Steinberg's imagination and creative accounting. Remember that when you contemplate the current financial crisis.
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It was sexy to be against the war back then. He was probably in it to get laid.
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