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Wall Street Journal: The Super PAC Lesson

Monday, November 12th, 2012

Thoughts on campaign spending from the Wall Street Journal.  There was not enough of it for their tastes.

Apparently Mitt was “defenseless” against Obama’s ads.

Wall Street Journal

In every election there are issues that take up an inordinate amount of media attention but turn out to be sideshows. This year’s champion is Super PAC spending. Liberals first claimed that the Koch brothers and other wealthy donors were “buying” the election, but now that Democrats have won they are claiming that these GOP donors were gullible fools for giving at all. They’re wrong on both counts.

Money did matter, as it always does to some extent. But the cash that really counted was the more than $100 million that the Obama campaign used from May through July in the battleground states to portray Mitt Romney as Gordon Gekko without the social conscience. The Election Day exit polls show that Mr. Romney’s image never recovered from that ad barrage. He ran largely a biographical campaign and the Obama campaign destroyed his business biography. His net favorability was negative.

Mr. Romney’s advisers told us in early August that they would have liked to respond to the attacks but lacked the cash to do that and at the same time to portray a positive message after they had run through all of their money during the primary. They went with the positive message, albeit one that didn’t make much of an impact.

By the way, this is also the early-advertising strategy that Bill Clinton and adviser Dick Morris used to destroy Bob Dole in 1996. You’d think Republican strategists would have remembered that.

The GOP Super PACs tried to fill the gap by attacking Mr. Obama, but they were hard pressed to speak for a candidate whom by law they are prohibited from coordinating with. Perhaps their ads could have been more effective, and perhaps some of that money would have been better spent on matching Democratic voter turnout operations. Those questions deserve to be part of a GOP self-examination. But it’s hard to believe that Mr. Romney would have done any better if the Super PACs hadn’t existed.

All of which suggests that the real problem this year wasn’t too much campaign spending but too little. The GOP lacked the cash to counter the attack ads when its candidate really needed it. Mr. Romney raised enough money after the conventions, but by then it was too late to expand the field of competition other than with a late sneak attack of the kind the campaign tried in Pennsylvania.

In focusing so much on rich GOP donors, the media also underplayed the way the Supreme Court’s 2010 Citizens United decision helped Democrats. That ruling overturned longstanding rules that prohibited unions from using dues money to communicate politically with non-union members. This allowed unions to run more efficient voter-targeting operations, since they didn’t have to skip non-union households, and it contributed to voter turnout in places like Nevada, Wisconsin and Ohio.

The unions were also helped by the many White House and campaign officials whom Mr. Obama dispatched to fund-raise for Democratic Super PACs—when he wasn’t busy criticizing GOP spending.

The history of campaign-finance limits is that attention to the issue recedes when Democrats win. But expect it to return in time for the 2014 campaign cycle, when the media will find some new Sheldon Adelson to portray as a threat to democracy even as unions go on spending their cash below the radar.

A far better reform would remove all donation limits to candidates, so nominees like Mr. Romney of either party aren’t left defenseless again. The Super PACs would fade in importance and the candidates would get to better control their own message. The U.S. is a huge country and it takes lots of money to educate voters.

Fox News: Battle of the billionaires — Super PACs offer chance for high rollers to sway 2012 race

Sunday, February 12th, 2012

Fox News joins the mainstream media in recognizing the flow of campaign money from a select group of wealthy individuals.

Fox News

If the American presidential system were boiled down into a Las Vegas casino game, “Super PAC” betting would be placed exclusively in the high-stakes room. 

The Super PAC system, a product of recent Supreme Court rulings, allows unlimited donations for political causes. And recent federal disclosure forms reveal the people behind them are the whales of the campaign trail — putting up donations frequently in excess of a quarter-million dollars. 

For the first time, voters are getting a glimpse at who’s funding the previously opaque organizations boosting the presidential candidates’ campaigns with outside spending. 

Mitt Romney, not surprisingly, has a slew of investment titans — including former colleagues at Bain Capital — pumping money into the Super PAC supporting his campaign. Newt Gingrich enjoys high-powered support out of Vegas. Ron Paul is being indirectly funded by the co-founder of PayPal. Rick Santorum’s Super PAC is backed mostly by two people. And President Obama’s Super PAC is kept well-heeled by Hollywood and union support

The nature of the donations is a world apart from the traditional campaign finance of presidential campaigns themselves — for which individual donations are capped at $2,500. 

In the world of Super PACs, $2,500 makes for a modest starting point. Donors routinely put up $100,000 and up in support of the campaign committee of their choice. And a relatively small number of high-dollar contributors are involved. 

No Super PAC better exemplifies the unbound financial potential of the new system than Romney’s group Restore Our Future

According to end-of-year filings with Federal Election Commission, the pro-Romney committee has raised more than $30 million, from just 282 donors. The average donation tops $100,000, and the fund is backed by plenty of high-rollers. 

At the top are donors like Robert Mercer, an executive at hedge fund firm Renaissance Technologies; John Paulson, president of hedge fund Paulson and Co.; Julian Robertson, founder of hedge fund Tiger Management; Paul Singer, founder of Elliott Management Corp.; and Edward Conard, a former Bain colleague. All put up $1 million apiece. 

J.W. Marriott Jr., chairman of Marriott International, also contributed $500,000, as did Richard Marriott, chief of Marriott offshoot Host Hotels & Resorts. 

By law, these campaign committees cannot coordinate with the presidential campaigns themselves or directly fund them. This catch explains why, when Romney and other candidates are challenged on Super PAC-funded ads, they note that their campaigns had nothing to do with the production. 

But they are surely aware, and the Super PACs serve a blunt purpose. 

According to a study by the Center for Responsive Politics, Restore Our Future has spent $17 million in opposition to Gingrich – in large part through advertising. 

The other Super PACs don’t have nearly as much money, but nevertheless serve as a potent tool for the candidates. 

Winning Our Future, a pro-Gingrich group, has been backed by Texas businessman Harold Simmons. The group reported raising over $2 million at the end of the year, from just 18 people

More recently, and subsequent to the 2011 filing period, Las Vegas casino magnate Sheldon Adelson drew headlines for putting up $5 million for the Gingrich Super PAC. His wife reportedly followed suit with another $5 million. 

In Paul’s corner is the Endorse Liberty group, which reported about $1 million raised for 2011. The group is supported almost exclusively by Peter Thiel, a hedge fund manager who co-founded PayPal. 

Santorum’s Red White and Blue Fund has raised slightly less than Paul’s Super PAC. That, too, is backed by a handful of supporters, including wealthy investor Foster Friess and John Templeton Jr., son of philanthropist John Templeton. 

And the pro-Obama Priorities USA Super PAC has raised a total of $4.4 million as of the end of 2011. About half of that came in the form of a $2 million donation from DreamWorks Animation CEO Jeffrey Katzenberg. Steven Spielberg also threw in $100,000

Those five groups are just a slice of the national Super PAC pie, though they account for much of the money raised. According to the Center for Responsive Politics, 318 groups have raised nearly $99 million as of early February. They’ve spent nearly $47 million in the 2012 cycle. 

The campaign finance free-for-all has raised pressing questions all along about whether the new system is a boon for free speech — speech, that is, in the form of monetary donations and ads — or a barrier for candidates who might not have the behind-the-scenes support of such wealth

Gingrich, despite the support of his Las Vegas benefactors, has complained that the glut of negative advertising by Romney’s supporters has damaged his candidacy. 

In Congress, House Democratic Leader Nancy Pelosi and others are pushing for a new bill that would, among other provisions, require TV ads to name top donors. 

Yet Obama’s campaign this past week seemed to embrace the new Super PAC reality. The campaign said Obama officials would speak at Priorities USA events. 

Romney reportedly has sanctioned the same kind of interaction.

CBS News: Money talks, but real money thunders

Monday, December 12th, 2011

It’s clear enough — or should be by now — that the electoral process has been occupied by the 1%; which means that what you hear in this “campaign” is largely refracted versions of their praise, their condemnation, their slurs, their views, their needs, their fears, and their wishes.  They are making money off, and electing a president via, you.  Which means that you — that all of us — are occupied, too.”   Tom Engelhardt

CBS News

….as President Obama hustled around my hometown, snarling New York traffic in the name of Campaign 2012.  He was, it turned out, “hosting” three back-to-back fundraising events: one at the tony Gotham Bar and Grill for 45 supporters at $35,800 a head (the menu: roasted beet salad, steak and onion rings, with apple strudel, chocolate pecan pie, and cinnamon ice cream — a meal meant to “shine a little light” on American farms); one for 30 Jewish supporters at the home of Jack Rosen, chairman of the American Jewish Congress, for at least $10,000 a pop; and one at the Sheraton Hotel, evidently for the plebes of the contribution world, that cost a mere $1,000 a head. (Maybe the menu there was rubber chicken.)

In the course of his several meals, the president pledged his support for Israel (in the face of Republican charges that he is eternally soft on the subject), talked about “taxes and the economy” to his undoubtedly under-taxed listeners, and made this stirringly meaningless but rousing comment: “No matter who we are, no matter where we come from, we’re one nation.  We’re one people. And that’s what’s at stake in this election.”

Outside his final event, Occupy Wall Street protesters saw something else at stake, dubbing him the “1% president.”  The end result from a night’s heavy lifting: $2.4 million for his election campaign and the Democratic National Committee, nowhere close to 1% of what they will need for the next year.

These were the 67th, 68th, and 69th fundraisers attended by Obama so far in 2011, or the 71st, 72nd, and 73rd.  (It depended on who was counting.) In either case, we’re talking about approximately one fundraiser every five days, a total of 6% of the events in which Obama took part in this non-election year.

Think about that.  You vote for the president to spend some part of 20% of his days raising money for his own future from the incredibly wealthy.  Or put another way, the Washington Post now estimates that if you add in the non-fundraising, election-oriented events that involve him — 63 so far in 2011 — perhaps 12% of his time is taken up with campaign efforts of one sort or another; and this is what he’s been doing 12 to 24 months before the election is scheduled to happen.

New York being the home of… gulp… Wall Street (1%! 1%!), Obama doesn’t exactly have it to himself.  Mitt Romney was heading into town on December 14th for his own rousing round of four fundraisers. One at the Waldorf Astoria will be hosted by — you can’t be balder than this — four JPMorgan Chase executives, including James B. “Jimmy” Lee, Jr., the vice chairman of the company and the “banker who battled the Obama administration over the restructuring of Chrysler LLC.”  And oh yes, Romney leads Obama in funding support from billionaires, 42 to 30 (with Rick Perry taking third place at 20).

In the 2008 election, JPMorgan employees gave $4.6 million to the candidates of their choice, coming in behind only Goldman Sachs and Citigroup on The Street.  Now that, I would say, is actual electoral power.  Perhaps it wouldn’t be too much of an exaggeration to say that the voting that matters most takes place at those fundraisers, not in the booths where, billions of dollars in attack ads later, the usual hoi polloi pull the handles on electoral slot machines. 

Their bread, our circus

In ancient Rome, the emperors provided the capital’s inhabitants with “bread and circuses.”  Ever since, that combination has been shorthand for rulers buying off the ruled with the necessities of life and spectacle.

In Rome, that spectacle involved gladiatorial and other elaborate games of death that took place in the Colosseum.  In this age, our rulers, the 1% whose money has flooded the electoral cycle, are turning the election itself into our extended circus.  This year, a series of Republican televised “debates” have glued increasing numbers of eyeballs to screens — and not just Republican eyeballs, either.  Everyone waits for the latest version of a reality show to produce the next cat fight, fabulous gaffe, late-night laugh line, confession, denial, scandal, or plot twist, the next thumbs up or, far better, thumbs down on some candidate’s increasingly brief political life in the arena.

Think of it as their bread and our circus.  Who can doubt that, like the crowds of Rome once upon a time, we await the inevitable thumbs-down vote and the YouTube videos that precede and follow it with a kind of continuing bloodlust?  The only problem: however strange all this may be, it’s not, at least in the old-fashioned sense, an election nor does it seem to have much to do with democracy.  The fact is that we have no word for what’s going on.  Semi-democracy?  Unrepresentative democracy?  1% democracy?  Demospectacracy?

Of course, we still speak of this as a presidential election campaign, and it’s true that 11 months from now more than 60% of the voting age population will step into polling booths across the country and cast ballots.  But let’s face it, if this is an election at all, it’s certainly one stricken with elephantiasis.  Once, as now, a presidential race had primaries, conventions, campaigning, mudslinging, and sometimes even a few debates, but all of this had limits.  In recent years, the limits — almost any limits — have been disappearing.  Along the way, the process has expanded from an eight-month-long affair that most voters only began to attend to sometime in the fall of election year to a perpetual campaign, perpetually discussed, reported on, and displayed.

The primaries, for instance, have been on a forced march toward ever-earlier dates. Iowa’s — actually a “caucus” — is now on January 3rd of election year and the first official primary, New Hampshire’s is on January 10th.  (Over the years, it’s repeatedly had to move its date forward from March to hold onto that status.)  This time around, the “debates” leading up to the primaries began last May; previously meaningless party “straw polls,” covered as monumental events by hundreds of reporters, accompanied them; the first of a World War I-style barrage of attack ads was launched in the same period, and the opinion polls on various constellations of likely (or unlikely) candidates — what Jonathan Schell once called our “serial elections” — preceded everything, accompanied by endless media speculation about them.

It’s an ever-expanding system, engorging itself on money and sucking in ever larger audiences.  It’s the Blob of this era.  In fact, the next campaign now kicks off in the media the day after (if not the day before) the previous election ends with speculation (polls soon to follow) handicapping the odds of future candidates, none yet announced.

The perpetual campaign

Once upon a time, the perpetual candidate — former Minnesota governor Harold Stassen was the classic example — proved a kind of running joke.  No longer.  Now, the president himself essentially begins his campaign for a second term almost as soon as he enters the Oval Office.

Similarly, former Massachusetts governor Mitt Romney, the media-anointed Republican nominee of this electoral cycle, has in fact been running for president since at least 2006.  It’s been his only real “job” since leaving the governorship in 2008.  In his life, he is now the embodiment of the perpetual candidate, and yet even those who make him the butt of endless TV jokes don’t find that fact strange or particularly worthy of comment.

Everywhere you care to look, the expansion of the presidential race is evident.  In the fall of 1948, in an election he was supposed to lose, Democratic President Harry (“give ’em hell”) Truman barnstormed the nation by train, decrying a “do-nothing Congress.”  By comparison, President Obama has been out this fall — the equivalent of 1947 — on what is clearly the campaign trail denouncing his own version of a do-nothing Congress.  And that’s only a start when it comes to turning election “year” into Election Life.

On money, the sky’s the limit.  In 2000, the total federal election season cost $3 billion; in 2008, more than $5 billion, of which an estimated $2.4 billion went into the presidential campaign.  With the Supreme Court having made it easier for outside money to pour in, thanks to its Citizens United decision, funding for campaign 2012 is expected to pass $6 billion and could even top $7 billion.  The Obama campaign, which raised $760 million in 2008, is expected to pass the billion-dollar mark this time around (with money already pouring in from the financial and banking sector on which candidate Mitt Romney is also heavily reliant).

TV advertising alone, which topped $2.1 billion in 2008, is expected to reach or exceed $3 billion this time around.  These are, of course, staggering sums.  Already the attack ads, mostly on the president, mostly from the sort of Super PACs that Citizens United let loose in the land, are zinging away far in advance of any previous presidential campaign season.  According to the Washington Post, $23 million worth of attack ads have come and gone, half of that from Karl Rove’s American Crossroads And as one analyst quoted by the New York Times put it, “These dollar figures we’re talking about now are going to seem quaint in a few months.  And they’ll seem really quaint in eight or nine months.”

For comparison’s sake, back in 1976, in the era when pundits were first beginning to write about presidential elections as perpetual campaigns, the total spending of presidential candidates Gerald Ford and Jimmy Carter was $66.9 million.

This inundation of money has also meant an inundation of lobbyists.  President Obama officially refuses to take campaign contributions from lobbyists. The New York Times recently reported, however, that 15 of his top “bundlers,” who give their own money and solicit that of others for the campaign — none registered as federal lobbyists — are “involved in lobbying for Washington consulting shops or private companies,” and they are raising millions for him.  A June report from the Center for Public Integrity concluded: “President Obama granted plum jobs and appointments to almost 200 people who raised large sums for his [2008] presidential campaign, and his top fundraisers have won millions of dollars in federal contracts.”

And the 2012 Republican field of presidential contestants puts Obama in the shade.  They seem determined to campaign cheek to jowl with as many lobbyists as they can corral.  More than 100 federal lobbyists have already contributed to Mitt Romney’s campaign, while Rick Perry has evidently risen to candidate status on the shoulders of Mike Toomey, a former gubernatorial chief of staff, friend, and money-raising lobbyist whose clients “have won $2 billion in [Texas] state government contracts since 2008.”  And that’s only scratching the surface.

In the meantime, a national machinery has been set up to staff that perpetual campaign.  By early October (again 2011, not 2012), according to the New York Times, the Obama campaign had opened offices in 15 states, had paid employees in 38 states, and had a Chicago headquarters with a paid staff of 200.  Thirteen months before the actual election, the Obama campaign and the Democratic National Committee had already shelled out “close to $87 million in operating costs.”  At this point, there is no Republican equivalent, as the many Republican candidates are still involved in the struggle for the nomination, while Obama, as vulnerable a president as we’ve seen in our time, miraculously lacks even a symbolic primary challenger.

Money talks

At the heart of the ever-expanding presidential campaign sit the media, especially television — especially those ads.  In 1996, when Republican Robert Dole ran against President Bill Clinton, the two camps spent an estimated $113 million for ads, almost all for television.  In the 2008 election for all federal offices, $2.7 billion went into television advertising.

This year, when the media is feeling the pinch of hard times, $3 billion dollars in prospective TV ads must look like manna from heaven.  In fact — though no one in the media ever writes about it — this has to represent one of the great conflict of interest stories of our time, maybe of all time.  The pundits, commentators, reporters, and news announcers who once again seem so intent on convincing us that this will be the election of the century are essentially drumming up business for the owners of their networks or cable stations who will profit handsomely, even staggeringly, from the dollars that those glued eyeballs bring in.

So Fox, for instance, is now a constant debate central for Republican candidates and is, in turn, pulling in advertising at a rate ahead of the 2008 campaign cycle.  “Like CNN, MSNBC and others,” writes Dan Hirschhorn of Ad Age, “Fox News is set to benefit from the proliferation of third-party political and issue advocacy groups including Super PACs and 527s, which can afford national airtime and are gearing up to be major players in 2012 politics.”

And like any reality show, for this one to succeed so far ahead of its appointed season, you need the constant drama of contestants being ushered on and off stage, of spectacular rises and no less spectacular collapses.  Hence, the stories of Michele Bachman, Rick Perry, and Herman Cain, which (if you were of a conspiratorial mind) might almost seem too good (or bad) to be true.

So far, the media’s election blitz has proven remarkably successful.  The audience for the very first Republican debate of 2011 almost doubled the audience for the first Republican debate of the 2008 campaign.  And as this round of debates has gained steam, it has nearly doubled its own initial numbers.  Meanwhile, the media version of the election campaign is visibly becoming a too-big-to-fail juggernaut.  In the process, it seems that we, the citizens, the viewers, have been given an election life sentence.  Our job is to sit and watch while the action happens elsewhere.

It’s true that, on November 6, 2012, Americans will enter voting booths and choose a candidate for president, and that makes this an “election.”  But thinking of it that way won’t get you far.  It’s also true, that, on January 20, 2013, a newly elected president will step into the Oval Office.  What any of this has to do with democracy, as opposed to spectacle, influence, corruption, the power of the incredibly wealthy to pay for and craft messages, and the power of media owners to enhance their profits is certainly an open question. Think, at least, how literally the old phrase “money talks” is being updated every time you hear the candidates, or see their ads, or get a robocall from one of them, or receive a geo-targeted mobile ad of theirs on your iPhone or Android.

It’s clear enough — or should be by now — that the electoral process has been occupied by the 1%; which means that what you hear in this “campaign” is largely refracted versions of their praise, their condemnation, their slurs, their views, their needs, their fears, and their wishes.  They are making money off, and electing a president via, you.  Which means that you — that all of us — are occupied, too.

So stop calling this an “election.”  Whatever it is, we need a new name for it.

Financial Sense: Interview with Director Francis Megahy

Thursday, December 8th, 2011

Financial Sense

Director Francis Megahy joins Jim on Financial Sense Newshour to discuss his film on the lobbying industry in Washington DC. Politicians now spend more than 25% of their time fundraising, while the number of lobbyists in Washington has more than doubled since 2000. Registered lobbyists have spent over 13 billion dollars in the last six years alone.

Veteran documentary director Francis Megahy, who now lives in the US, began his career in British television, as a writer and director, working on documentaries for the BBC and ITV networks. Later he wrote and directed top-rated television series and television movies. Megahy has made more than forty documentaries for British television channels.

The Most Important Story of the Past 24 Hours

Monday, November 28th, 2011

Crack investor Mark Hanna summarizes the Bloomberg News article on Federal Reserve secret lending to banks.  Links directly to the Bloomberg article.

Notice that the lobbying expenditures of the affected banks has greatly increased.  Connection?

Trader Mark

This Bloomberg Markets piece on the action’s of the Federal Reserve, in secret, should be required reading for every American citizen.  While ‘too complex’ for the masses, what is going on in the back halls of D.C. is simply amazing.  Bloomberg has been fighting for two years through Freedom of Information acts to get to the data – thankfully some parts of our press are not completely owned and paid for by the corporatacity (yes, I’m making up words).   As with almost everything else in this country, the numbers are so large as to escape comprehension – at this point the Fed could be handing out $500 quadrillion, and it would not make that much of a difference in terms of impact to the psyche.  TBTF lives on…..

Quite a lengthy read so I encourage the full review, but some snippets:

  • The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing.
  • The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day.  (let’s stop there for a moment – absorb that number – the entire national GDP in a year is $14T.  In one day the banks required 1/14th of our entire national output!  Too big to fail? or bail? Certainly not the latter)
  • Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy
  • And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.
  • Saved by the bailout, bankers lobbied against government regulations, a job made easier by the Fed, which never disclosed the details of the rescue to lawmakers even as Congress doled out more money and debated new rules aimed at preventing the next collapse.
  • A fresh narrative of the financial crisis of 2007 to 2009 emerges from 29,000 pages of Fed documents obtained under the Freedom of Information Act and central bank records of more than 21,000 transactions. While Fed officials say that almost all of the loans were repaid and there have been no losses, details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger.
  • The size of the bailout came to light after Bloomberg LP, the parent of Bloomberg News, won a court case against the Fed and a group of the biggest U.S. banks called Clearing House Association LLC to force lending details into the open.
  • The Fed, headed by Chairman Ben S. Bernanke, argued that revealing borrower details would create a stigma — investors and counterparties would shun firms that used the central bank as lender of last resort — and that needy institutions would be reluctant to borrow in the next crisis. Clearing House Association fought Bloomberg’s lawsuit up to the U.S. Supreme Court, which declined to hear the banks’ appeal in March 2011.
  • The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he “wasn’t aware of the magnitude.” It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.
  • “TARP at least had some strings attached,” says Brad Miller, a North Carolina Democrat on the House Financial Services Committee, referring to the program’s executive-pay ceiling. “With the Fed programs, there was nothing.”
  • The Fed initially released lending data in aggregate form only. Information on which banks borrowed, when, how much and at what interest rate was kept from public view.  The secrecy extended even to members of President George W. Bush’s administration who managed TARP. Top aides to Paulson weren’t privy to Fed lending details during the creation of the program that provided crisis funding to more than 700 banks, say two former senior Treasury officials who requested anonymity because they weren’t authorized to speak.
  • The Treasury Department relied on the recommendations of the Fed to decide which banks were healthy enough to get TARP money and how much, the former officials say. The six biggest U.S. banks, which received $160 billion of TARP funds, borrowed as much as $460 billion from the Fed, measured by peak daily debt calculated by Bloomberg using data obtained from the central bank. 
  • The six — JPMorgan, Bank of America, Citigroup Inc. (C), Wells Fargo & Co. (WFC), Goldman Sachs Group Inc. (GS) and Morgan Stanley — accounted for 63 percent of the average daily debt to the Fed by all publicly traded U.S. banks, money managers and investment- services firms, the data show. By comparison, they had about half of the industry’s assets before the bailout, which lasted from August 2007 through April 2010. 
  • Judd Gregg, a former New Hampshire senator who was a lead Republican negotiator on TARP, and Barney Frank, a Massachusetts Democrat who chaired the House Financial Services Committee, both say they were kept in the dark. “We didn’t know the specifics,” says Gregg, who’s now an adviser to Goldman Sachs. (I’m laughing more at where Gregg landed rather than our Congress being in the dark – although both are laughable)  “We were aware emergency efforts were going on,” Frank says. “We didn’t know the specifics.”
  • Byron L. Dorgan, a former Democratic senator from North Dakota, says the knowledge might have helped pass legislation to reinstate the Glass-Steagall Act, which for most of the last century separated customer deposits from the riskier practices of investment banking.  “Had people known about the hundreds of billions in loans to the biggest financial institutions, they would have demanded Congress take much more courageous actions to stop the practices that caused this near financial collapse,” says Dorgan, who retired in January.  (Dorgan is one of the few in Congress who actually seemed to be doing his job – he saw this crisis coming a decade earlier!) 
  • Instead, the Fed and its secret financing helped America’s biggest financial firms get bigger and go on to pay employees as much as they did at the height of the housing bubble.  Total assets held by the six biggest U.S. banks increased 39 percent to $9.5 trillion on Sept. 30, 2011, from $6.8 trillion on the same day in 2006, according to Fed data. (“too even bigger to fail”)
  • Lobbying expenditures by the six banks that would have been affected by the legislation rose to $29.4 million in 2010 compared with $22.1 million in 2006, the last full year before credit markets seized up — a gain of 33 percent, according to OpenSecrets.org, a research group that tracks money in U.S. politics. Lobbying by the American Bankers Association, a trade organization, increased at about the same rate, OpenSecrets.org reported.
  • Top officials in President Barack Obama’s administration sided with the FSF in arguing against legislative curbs on the size of banks.

And of course the man whose negligence of regulation at the head of the NY Fed…. was promoted for his ‘good works’ for the banks or as Blankfein would say he was ‘doing God’s work’.

  • On May 4, 2010, Geithner visited Kaufman in his Capitol Hill office. As president of the New York Fed in 2007 and 2008, Geithner helped design and run the central bank’s lending programs. The New York Fed supervised four of the six biggest U.S. banks and, during the credit crunch, put together a daily confidential report on Wall Street’s financial condition. 
  • At the meeting with Kaufman, Geithner argued that the issue of limiting bank size was too complex for Congress and that people who know the markets should handle these decisions, Kaufman says.   In the end, Geithner had his way. The Brown-Kaufman proposal to limit the size of banks was defeated, 60 to 31
  • Lobbyists for the big banks made the winning case that forcing them to break up was “punishing success,” Brown says. 

Much more in the story….

Washington Post: How lobbyists make government regulations more burdensome

Sunday, November 13th, 2011

One of the chief complaints you hear about Obama’s Wall Street reform law is that it imposes hugely complex, burdensome regulations on businesses. But why did that happen? It’s partly because industry lobbyists have pushed so hard to carve out exemptions in the law.

Washington Post

That’s what happened with the Volcker Rule, which intends to prevent banks from trading for their own benefit, rather than their customers’. The rule originally started out a 10-page provision that has ballooned to nearly 300 pages with scores of exemptions in place, as some supporters of the reform pointed out at an event on Wednesday.

“It’s not actually as onerous as some make it out to be…the complexity burden that people are complaining about is the result of lobbying for these exemptions,” said Anthony Dowd, currently chief of staff to former Federal Reserve chief Paul Volcker, whose original proposal gave birth to the eponymous rule. Volcker himself has repeatedly said that he’d prefer a much simpler, shorter rule, but one that better empowers regulators to enforce the principle behind the rule at their discretion. Some have taken Volcker’s criticism to mean that he’s “soured” on his own rule. But Dowd emphasizes that his boss still strongly supports the regulation but wants to undo some of the exemptions that have been made for hedge funds and private equity trading — and will submit his own recommendations shortly.

Problem is, “it’s much easier for regulators to write complex rules than simple rules,” Matthew Richardson, a financial economics professor at New York University, said at the gathering, sponsored by Americans for Financial Reform. A simpler rule would likely give regulators much broader authority, leaving them to judge whether a firm was violating the spirit of the rule. Richardson then referenced a comment that Volcker had made back in 2010, when Dodd-Frank was being deliberated: excessive risk is “like pornography: you know it when you see it.”

But empowering regulators, of course, isn’t what most critics of Dodd-Frank want either. So industry players are basically sticking with the lobbying-for-exemptions approach. In some ways, it works both ways for them: they have a chance of getting a carve-out to avoid regulation. And by making the rule more complex, that carve-out also strengthens the case of those who complain that Dodd-Frank is too onerous and are fighting to repeal it altogether.

 

Fund My Mutual Fund: Some Fascinating Stats About Our Corporate Oligarchy

Wednesday, August 31st, 2011

Highly respected  Trader Mark weighs in on Bloomberg’s report on the relationship between CEO pay, taxes paid and lobbying expenditures.

Fund My Mutual Fund

While I realize the Supreme Court has deemed corporations are people too, it is still fascinating to read some facts about said ‘people’  Bloomberg has a story on a study showing the relationship between lobbying dollars and federal taxes paid AND CEO pay versus federal taxes paid.  Remember, this from the ‘people’ who claim their tax burden is so overwhelming they can’t create jobs. 😉  It really shows the level of oligarchy and some would claim fascism (I have called it ‘corporate socialism’ the past few years) when companies spend more on lobbying then they have to pay in federal taxes.  Or when one person in the organization is paid more than the entire federal tax due.

  • Twenty-five of the best-paid chief executive officers in the U.S. earned more in salary and other compensation in 2010 than their companies’ federal income tax expenses as disclosed in public filings, according to a report by the Institute for Policy Studies.
  • The Washington-based nonprofit group’s report, released today, examined 100 publicly traded U.S. corporations with the highest-paid CEOs. It found that companies whose CEOs’ compensation exceeded reported tax expense in 2010 had average global profits of $1.9 billion.
  • Companies in this group, according to the report, included EBay Inc., General Electric Co., Verizon Communications Inc., Boeing Co. and Dow Chemical Co. The tax expense reported in annual financial statements can differ from actual tax payments, which are confidential, for a variety of reasons.
  • The group said its findings underscore the need for an overhaul of the U.S. tax code that would reduce the number of tax strategies available to companies, especially their ability to lower tax payments by parking profits overseas. “Tax reform has to close up some of these loopholes and the offshore system,” Chuck Collins, one of the report’s authors, said in an interview. “We might be able to lower the overall corporate rate by broadening the base.”
  • Eighteen of the 25 companies mentioned in the report operated subsidiaries in countries known as offshore tax havens, Collins said.  The firms, all combined, had 556 tax haven subsidiaries last year.
  • Twenty of the 25 companies on the institute’s list reported spending more on lobbying Congress than they did on federal taxes, the organization said. Data for the report was taken from annual reports and other public filings.  The 25 firms highlighted in this study spent a combined total of more than $150 million on lobbying and campaign contributions last year.
  • The report echoes some elements of a study released in May by Citizens for Tax Justice, a Washington-based nonprofit group backed by labor unions, which said 11 U.S. corporations reported $62 billion in domestic profits while paying a negative 3.6 percent tax rate in 2010.

Link to original report here.

  • In 2009, we calculate, major corporate CEOs took home 263 times the pay of America’s average workers. Last year, this gap leaped to 325-to-1

Some neat examples:

  • Verizon, which earned $11.9 billion in pretax United States profits, received a federal tax refund of $705 million. (damn that onerous 35% tax rate!) The company’s chief executive, Ivan Seidenberg, meanwhile, received $18.1 million in compensation
  • The online retailer eBay reported pretax profits of $848 million and received a $113 million federal refund. John Donahoe, eBay’s chief executive, collected a compensation package worth $12.4 million, the study said.

[Oct 7, 2009: Dylan Ratigan – America Being Subjected to “Corporate Communism”]
[Mar 25, 2011: NYT – GE’s Strategies Let it Avoid Taxes Altogether]
[Apr 14, 2011: U.S. Corporate Taxes – 1955 v 2010]

Chicago Tribune: Top lobbying banks got biggest bailouts: study

Thursday, June 2nd, 2011

Not only did the top lobbying banks get the biggest bailouts, they also had the biggest losses.  Were they buying insurance?

Chicago Tribune

The more aggressively a bank lobbied before the financial crisis, the worse its loans performed during the economic downturn — and the more bailout dollars it received, according to a study published by the National Bureau of Economic Research this week.

The report, titled “A Fistful of Dollars: Lobbying and the Financial Crisis,” said that banks’ lobbying efforts may be motivated by short-term profit gains, which can have devastating effects on the economy.

“Overall, our findings suggest that the political influence of the financial industry played a role in the accumulation of risks, and hence, contributed to the financial crisis,” said the report, written by three economists from the International Monetary Fund.

Data collected by the three authors — Deniz Igan, Prachi Mishra and Thierry Tressel — show that the most aggressive lobbiers in the financial industry from 2000 to 2007 also made the most toxic mortgage loans. They securitized a greater portion of debt to pass the home loans onto investors and their stock prices correlated more closely to the downturn and ensuing bailout.

The banks’ loans also suffered from higher delinquencies during the downturn.

What the economists could not determine definitively was the banks’ motivation for lobbying. If banks were looking to generate income at society’s expense, then it would make sense to curtail their lobbying.

If banks were concerned mainly about short-term profit and not thinking about the long-term consequences, then executive compensation practices should be changed, the report said. And if banks just wanted to inform lawmakers, and were overoptimistic about their prospects, it would be more difficult to suggest reforms.

BIG LOBBYING, BIG BAILOUTS

When the bubble burst, banks that spent more on lobbying received “a bigger piece of the cake” from the $700 billion bailout in the fall of 2008.

As examples, the report cites Citigroup Inc spending $3 million to lobby against the HR-1051 Predatory Lending Consumer Protection Act of 2001 as well as Bank of America Corp spending $1 million to lobby on banking and housing issues.

HR-1051 was never signed into law, nor were 93 percent of all bills promoting tighter regulation from 1999 through 2006. However, two bills that significantly reduced restrictions in the mortgage market became law, the American Homeownership and Economic Opportunity Act of 2000 and the American Dream Downpayment Act of 2003.

Citigroup and Bank of America each eventually received $45 billion worth of bailout funds, more than JPMorgan Chase & Co , Wells Fargo & Co or other large commercial banks.

Now that the Dodd-Frank financial reform bill has passed, big banks have been lobbying aggressively against restrictions they believe are too harsh. Among the top items on the industry’s lobbying agenda are stronger capital regulations, as well as a Consumer Financial Protection Bureau, new rules on derivatives trading and restrictions on proprietary trading.

 

Dow Jones News: Lobbying Contributed To Financial Crisis – IMF Report

Saturday, April 30th, 2011

IMF report states the obvious, financial institutions lobbied against any proposed regulations which might have provided checks to the risky practices which led to the meltdown.

NASDAQ

Lobbying by financial firms contributed to lax regulations that helped cause the financial crisis, according to three researchers at the International Monetary Fund in a paper quietly released last month.

The researchers–Deniz Igan, Prachi Mishra and Thierry Tressel–argued the mortgage lenders that lobbied most aggressively in Washington for a more lax regulatory environment took more risks and exposed themselves to worse outcomes during the crisis.

The researchers also argued that these same lenders were more likely to receive money from the federal bank bailout, possibly because these firms were hit harder during the crisis and had relationships with key lawmakers.

The researchers said Citigroup Inc. (C), which nearly collapsed during the crisis and required $45 billion in government support to stay alive, lobbied intensely against a 2001 bill that aimed to put tighter restrictions on lenders.

Such lobbying was part of a trend of the financial sector’s push for more lax regulation. From 1999 through 2006, 93% of all the bills promoting tighter regulation were never signed into law, the study said. Two key pieces of legislation to promote lax lending in mortgage markets were enacted in 2000 and 2003.

A Citigroup spokesman declined to comment.

The authors said it is “extremely difficult to pin down the most likely motivation” for the financial industry’s lobbying efforts ahead of the crisis, though they said it is possible lenders were hoping for a lower probability of scrutiny by bank supervisors or a higher probability of being bailout out in the event of a financial crisis.

Kathleen Day, a spokesman at the Center for Responsible Lending, said the study appears to confirm the perception that what financial firms marketed to lawmakers as financial innovation was really the abandonment of “common-sense lending principles,” such as solid underwriting standards for home loans.

“What they were promoting as financial innovation turned out to be irresponsible risk taking,” she said

Politico: How Microsoft learned ABCs of D.C.

Wednesday, April 6th, 2011

Michael Kinsley declares politicians’ view of lobbying is the equivalent of a protection racket.

Politico

For many years before the lawsuit, Microsoft had virtually no Washington “presence.” It had a large office in the suburbs, mainly concerned with selling software to the government. Bill Gates resisted the notion that a software company needed to hire a lot of lobbyists and lawyers. He didn’t want anything special from the government, except the freedom to build and sell software. If the government would leave him alone, he would leave the government alone.

At first, this was regarded (at least in Washington, D.C.) as naive. Grown-up companies hire lobbyists. What’s this guy’s problem? Then it was regarded as foolish. This was not a game. There were big issues at stake. Next it came to be seen as arrogant: Who the hell does Microsoft think it is? Does it think it’s too good to do what every other company of its size in the world is doing?

Ultimately, there even was a feeling that, in refusing to play the Washington game, Microsoft was being downright unpatriotic. Look, buddy, there is an American way of doing things, and that American way includes hiring lobbyists, paying lawyers vast sums by the hour, throwing lavish parties for politicians, aides, journalists and so on. So get with the program.

Warren Buffett famously said that the thing is to learn from other people’s mistakes, not your own. Google learned from Microsoft. It did not dis Washington. It has had a Washington lobbying operation almost from the very beginning of the company, way back in 2003. In 2008, Google opened a glamorous new D.C. office, described by Google’s senior manager of global communications and public affairs as “a showcase of the company and what it means.” The very fact that Google has a senior manager of global communications and public affairs suggests that Google might not be quite the noncorporate corporation it sees itself as.

And if Google can hold on just a bit longer, the pointing finger inevitably will move again, this time to Facebook. But Facebook will be prepared. Even before its stock goes public, it is making noises about hiring President Barack Obama’s former press secretary, Robert Gibbs, and has already hired Marne Levine, former chief of staff of the National Economic Council. And not because of their code-writing skills.

As the Microsoft example suggests, the Washington culture of influence peddling is not entirely, or even primarily, the fault of the corporations that hire the lobbyists and pay the bills. It’s a vast protection racket, practiced by politicians and political operatives of both parties. Nice little software company you’ve got here. Too bad if we have to regulate it or if Big Government programs force us to raise its taxes. Your archrival just wrote a big check to the Washington Bureaucrats Benevolent Society. Are you sure you wouldn’t like to do the same?