Deal with Saudis underlines benefits of backing president
He heaped praise on Jared Kushner at a private gathering of bankers and corporate executives in December, congratulating President Donald Trump’s son-in-law on the surprise election triumph. He stood up again in May before a smaller group of corporate leaders to remind them of all the good the Trump administration could do for the economy and the country.
And at a meeting Monday with his employees, as Trump’s support in corporate America began to crumble over remarks about white nationalists, he condemned the violence in Charlottesville, Va., but not the president’s response to it. By week’s end, a rebellion among corporate leaders led to the disbanding of top business advisory councils to the president.
Stephen A. Schwarzman, chief executive of private equity giant Blackstone, has not been alone on Wall Street in his embrace of the Trump presidency, particularly after the corporate world endured eight years of Obama-era regulation. But in each of these private meetings, recounted by people who attended them, Schwarzman emerged as one of the president’s most respected and reliable allies in high finance.
People close to Schwarzman said he does not view himself as a member of the president’s inner circle, but rather as an independent businessman who gives the White House advice on trade and the economy.
But Schwarzman’s stature in both the world of finance and in Trump’s Washington helped Blackstone nail down one of the biggest deals on Wall Street this year — its selection by Saudi Arabia to manage a new $20 billion fund, according to a person with knowledge of the selection process.
In May, while the president was visiting Saudi Arabia, Blackstone announced the agreement to manage the fund, the largest in the world to invest in infrastructure projects. The announcement was made at the royal palace in Riyadh as Trump and Kushner looked on.
Blackstone has noted it has a long-running relationship with Saudi Arabia, which had invested in Blackstone before, and said Schwarzman’s support for the president had nothing to do with the infrastructure deal, which it believes would have happened regardless of who was president. The agreement was the “culmination of a year’s discussions” with the Saudis that began during the Obama administration, the company said.
Still, interviews with four people briefed on the deal revealed the Saudis had been discussing a possible partnership with a number of other firms as well, and formally decided on Blackstone only after Schwarzman had started advising the president.
There is no suggestion Blackstone did anything wrong. Instead, the company’s experience illustrates the incentives corporate leaders have to develop strong ties with Trump and the reputational risks associated with those relationships when Trump veers off course, as he did last week.
“Public service is a core value for people of my generation,” Schwarzman said in a statement. “It’s a great privilege to be asked to help the country — even if it occasionally comes with some degree of criticism.”
Trump’s visit to Saudi Arabia pushed the Blackstone deal forward so it could be announced while the president was there, two people briefed on the agreement said. And the new fund, which plans to invest in projects like aging bridges and roads primarily in the United States, is expected to benefit from any federal infrastructure plan that may materialize under the Trump administration.
A Blackstone spokeswoman said that while a federal plan “would be helpful, our business is not at all dependent upon it since state and local governments — which build the vast majority of projects — are already pursuing billions of dollars in public-private partnerships.”
Some of the other investment firms in discussions about a Saudi partnership, including Brookfield and Carlyle Group, had more experience in managing infrastructure funds and are still in talks with the Saudis according to the people who were not authorized to speak about a private deal.
But the Saudi sovereign wealth fund saw that as a benefit for Blackstone: Without its own infrastructure fund, the company would have the flexibility to build one from scratch to the liking of the Saudis. Blackstone, which has invested in infrastructure projects but does not have a stand-alone fund, is expected to raise at least another $20 billion for the Saudi fund.