“Wall Street’s Threat To The American Middle Class”: Do We Really Need To Be Reminded About What Happened Six Years Ago?
Presidential aspirants in both parties are talking about saving the middle class. But the middle class can’t be saved unless Wall Street is tamed.
The Street’s excesses pose a continuing danger to average Americans. And its ongoing use of confidential corporate information is defrauding millions of middle-class investors.
Yet most presidential aspirants don’t want to talk about taming the Street because Wall Street is one of their largest sources of campaign money.
Do we really need reminding about what happened six years ago? The financial collapse crippled the middle class and poor — consuming the savings of millions of average Americans, and causing 23 million to lose their jobs, 9.3 million to lose their health insurance, and some 1 million to lose their homes.
A repeat performance is not unlikely. Wall Street’s biggest banks are much larger now than they were then. Five of them hold about 45 percent of America’s banking assets. In 2000, they held 25 percent.
And money is cheaper than ever. The Fed continues to hold the prime interest rate near zero.
This has fueled the Street’s eagerness to borrow money at rock-bottom rates and use it to make risky bets that will pay off big if they succeed, but will cause big problems if they go bad.
We learned last week that Goldman Sachs has been on a shopping binge, buying cheap real estate stretching from Utah to Spain, and a variety of companies.
If not technically a violation of the new Dodd-Frank banking law, Goldman’s binge surely violates its spirit.
Meanwhile, the Street’s lobbyists have gotten Congress to repeal a provision of Dodd-Frank curbing excessive speculation by the big banks.
The language was drafted by Citigroup and personally pushed by Jamie Dimon, CEO of JPMorgan Chase.
Not incidentally, Dimon recently complained of being “under assault” by bank regulators.
Last year JPMorgan’s board voted to boost Dimon’s pay to $20 million, despite the bank paying out more than $20 billion to settle various legal problems going back to financial crisis.
The American middle class needs stronger bank regulations, not weaker ones.
Last summer, bank regulators told the big banks their plans for orderly bankruptcies were “unrealistic.” In other words, if the banks collapsed, they’d bring the economy down with them.
Dodd-Frank doesn’t even cover bank bets on foreign exchanges. Yet recent turbulence in the foreign exchange market has caused huge losses at hedge funds and brokerages.
This comes on top of revelations of widespread manipulation by the big banks of the foreign-exchange market.
Wall Street is also awash in inside information unavailable to average investors.
Just weeks ago a three- judge panel of the U.S. court of appeals that oversees Wall Street reversed an insider-trading conviction, saying guilt requires proof a trader knows the tip was leaked in exchange for some “personal benefit” that’s “of some consequence.”
Meaning that if a CEO tells his Wall Street golfing buddy about a pending merger, the buddy and his friends can make a bundle — to the detriment of small, typically middle-class, investors.
That three-judge panel was composed entirely of appointees of Ronald Reagan and George W. Bush.
But both parties have been drinking at the Wall Street trough.
In the 2008 presidential campaign, the financial sector ranked fourth among all industry groups giving to then candidate Barack Obama and the Democratic National Committee. In fact, Obama reaped far more in contributions from the Street than did his Republican opponent.
Wall Street also supplies both administrations with key economic officials. The treasury secretaries under Bill Clinton and George W. Bush – Robert Rubin and Henry Paulson, respectfully, had both chaired Goldman Sachs before coming to Washington.
And before becoming Obama’s treasury secretary, Timothy Geithner had been handpicked by Rubin to become president of Federal Reserve Bank of New York. (Geithner is now back on the Street as president of the private-equity firm Warburg Pincus.)
It’s nice that presidential aspirants are talking about rebuilding America’s middle class.
But to be credible, he (or she) has to take clear aim at the Street.
That means proposing to limit the size of the biggest Wall Street banks; resurrect the Glass-Steagall Act (which used to separate investment from commercial banking); define insider trading the way most other countries do – using information any reasonable person would know is unavailable to most investors; and close the revolving door between the Street and the U.S. Treasury.
It also means not depending on the Street to finance their campaigns.
By: Robert Reich, The Robert Reich Blog, January 26, 2015
“What Donors Want”: They Helped Elect A New Class Of Congress Members; Now What?
When the 114th Congress convenes on Tuesday, lawmakers won’t merely be thinking of the voters who put them in office. They’ll also be mindful of the donors who helped them reach those voters in the first place.
The 2014 midterm elections cost some $3.7 billion, according to the nonpartisan Center for Responsive Politics. That’s a lot of moneyed interests to consider, and sometimes they aren’t pulling lawmakers in the same direction. What’s a senator to do, for example, if the small-government Koch groups see a federal spending plan as too lavish while the U.S. Chamber of Commerce thinks of it as a win for business?
Scott Reed, a top political adviser for the Chamber, had this take on donor expectations: “We don’t expect the candidates we endorsed to line up 100 percent with us, but we’d like to get them in the 80 percent range.”
Here’s a look at what’s on some donor wish lists—and how they intersect and conflict with each other.
The Koch brothers want an authentic spending fight
Billionaire energy executives Charles and David Koch have a network of advocacy groups that sunk at least $150 million into last year’s elections. They want their senators to be soldiers for less government spending.
“What I want these candidates to do is to support a balanced budget,” David Koch told Barbara Walters in an ABC interview in December. “I’m very worried that if the budget is not balanced that inflation could occur and the economy of our country could suffer terribly.”
Tim Phillips, president of Americans for Prosperity, the most active nonprofit in the Koch alliance, said his group won’t be shy about calling out lawmakers who take their eye off this spending ball. Phillips predicted chafing between deficit hawks like his group and others that might be willing to sacrifice purity if it means getting their preferred projects funded.
The Chamber of Commerce wants the government to invest in infrastructure
That makes the Chamber, which put up $35 million to usher into office more business-minded Republicans, a potential foe to the Kochs’ top objective. The group spent most of its money on primary contests and notched a win rate of 14 out of 15 candidates, Reed said. The goal was to elect Republicans who are “committed to governing,” he said.
“What we did not want,” he said, “are the candidates who say, ‘Let’s get to D.C. so we can shut the damn place down.'”
The Chamber thinks Republicans should be prepared to fund infrastructure, even featuring that message in some of its candidate advertisements last year. “The key ingredients to thriving free enterprise are roads, bridges and tunnels,” Reed said.
Crossroads wants to avoid messy clashes that could ding the GOP image ahead of 2016
The Chamber can probably count on Karl Rove’s powerful Crossroads political groups as an ally. They’re driven far less by ideology than by party politics. That makes sense: Rove was former President George W. Bush’s top strategist, earning the nickname “Bush’s brain.” The Crossroads enterprise spent $100 million on the 2014 races, according to American Crossroads President Steven Law, and wants more than anything to put the party in a good position for the 2016 presidential election.
“Voters expect constructive action, not obstructionism. They want Washington to work and lawmakers to get things done,” Rove wrote in his post-election column in the Wall Street Journal. “Their expectations are low because their distrust of politicians is high. So surprise them. The rewards will be great if the GOP shows it has a governing agenda.”
Translation: Crossroads wants to keep senators from doing politically damaging things that might cost seats or, worse, the presidency in 2016. To that end, Crossroads will spend much of 2015 providing Republican leaders with research to advise them how to broaden the party’s appeal and what kinds of legislation voters would like to see. “There’s an appetite for constructive change, not reflexive opposition,” Law said.
As for any looming fiscal battles, “we strongly support spending restraint,” Law said. “But where we differ with some of the other groups is in tactics.” He said shutting down the government in protest of Obama’s health care law is a prime example of the kind of “colossal failure” he hopes Republican lawmakers will avoid. “You have to think through what you’re going to get for it. We’d be concerned about shutdown gambits that would tarnish the brand.”
Law, like many representatives of the political money groups, will make the rounds on Tuesday, congratulating the new members and attending various parties in their honor. “Everyone we were helpful to has been very kind about letting us know they appreciated our role,” he said.
Sheldon Adelson seeks the death of online gambling
A billionaire casino executive, Adelson wants to stop what he sees as the scourge of online gambling. He argues it’s not about the bottom line for his international gambling empire, but rather it’s an issue of morality because kids can get hooked on betting. Three states have already legalized online gambling, but Congress could step in with a federal ban. That’s what Adelson has pushed for through a Washington advocacy group he started in 2014.
Although some have argued that it’s too late for action, Adelson isn’t just anyone—he’s a megadonor. In addition to pumping more than $90 million into the 2012 presidential election, he spent $5 million last year to elect Republican House members. Politico reports he may have funneled tens of millions more through nonprofit groups that don’t disclose their donors.
Coal Country wants a return to power
The coal industry demonstrated last year that it can still fuel election turnout. Incoming Senate Majority Leader Mitch McConnell used a pro-coal message to pad his win in Kentucky. More than one-third of McConnell’s TV ads in his race against Democrat Alison Lundergan Grimes invoked his pro-coal stance, and voter turnout showed the message hit home: He improved his vote totals throughout the state’s coal counties.
The pro-coal theme also played well in West Virginia, where Republican Shelley Moore Capito defeated a Democratic opponent. The American Chemistry Council, American Energy Alliance and United Mine Workers of America Power PAC all weighed in with campaign money and election-time advertising. They’ll be after lawmakers to push back on President Barack Obama’s new regulations limiting smog, which were seen as a direct hit on the coal industry.
Black pastors bought themselves an unlikely friend
Weighing in at just $183,340 in contributions, All Citizens for Mississippi certainly wasn’t the election cycle’s biggest super-PAC. But it packed an important punch. The group worked to motivate African Americans to head to the polls in support of Republican Senator Thad Cochran, who was facing a surprisingly tough primary challenge from the right. The super-PAC, led by a black minister, put out radio ads warning that Cochran opponent Chris McDaniel would be bad for race relations.
Bishop Ronnie Crudup of the New Horizon Church International, who started the super-PAC, said its work on behalf of Cochran erased any doubt about the importance of Mississippi’s African American voters. Crudup said he’s had post-election conversations with Cochran. “The senator knows that African Americans stepped up for him, and I can’t put words in his mouth, but he has made good, affirmative statements that he appreciates the support.”
On Crudup’s wish list: better funding for historically black colleges and universities, policies that bring jobs to Mississippi and federal funding for workforce development. And there’s the issue of Obamacare. Crudup said he’d be very disappointed if Cochran tries to obliterate what he sees as a law that has been particularly helpful in getting African Americans health insurance coverage. “I think that our senator understands his constituents, black and white, depend on that service,” Crudup said.
By: Julie Bykowicz, Thank You Notes, Bloomberg Politics, January 5, 2015
“The 100 Rich People Who Run America”: The Ultra-Wealthy Have Taken Over The Political System
We are well past the point that anyone will be shocked or even surprised by how distorted our system of funding campaigns has become, but thanks to some excellent reporting by Ken Vogel at Politico, we now have some interesting new perspective.
We have reached a tipping point where mega donors completely dominate the landscape. The 100 largest donors in the 2014 cycle gave almost as much money to candidates as the 4.75 million people who gave $200 or less (and certainly that number goes from “almost” to “more” if we could include contributions that are not required by law to be disclosed).
Think about this for a minute. This is consequential. It means that candidates running for office are genuflecting before an audience of 100 wealthy individuals to fuel their campaigns. So, whose bidding do we think these candidates are going to do? Is it any wonder that the interests of large corporations and unions get to the front of the line?
Liberal Democrats like to blow their bugles about how all the big money in politics comes from rich Republicans. Actually, as Vogel points out, 52 of the 100 top donors are Democrats, and the No. 1 donor by far is Democrat Tom Steyer, who chipped in $74 million.
At least we’ve achieved some bipartisanship somewhere in our political ecosphere. Both parties are now equal opportunity offenders when it comes to gaming the system.
But I don’t fault Steyer or the Koch brothers for trying to exert their influence on politics and public policy. They have strongly held beliefs and issues they care about deeply, and they are simply spending a lot of their money to try and change things in a direction they believe would be better. Nothing illegal or unethical about that.
But let’s call the system that Citizens United and other rulings and laws have created what it is: an oligarchy. The system is controlled by a handful of ultra-wealthy people, most of whom got rich from the system and who will get richer from the system.
Supporters of the system believe that the $3.67 billion we spent on elections last cycle isn’t really all that much money. An Arkansas poultry company owner and big time political donor, Ronnie Cameron, reflected to Vogel that it’s not so different today than it’s been in the past when, “Our country was founded by the wealthy landowners having the authority and representing all the people.”
He said that out loud. To a reporter. Knowing other people might read those words. Without any apparent irony. Imagine all the poor Americans who will sleep better knowing that a rich Southern chicken farmer is happy to represent their interests.
Vogel gets to the heart of the problem though, reporting that, “When all the donations are tallied and analyzed, 2014 is likely to be noteworthy for two other milestones on the opposite end of the spectrum from the growth of mega-donations: It’s on pace to be the first mid-term election since 1990—the earliest cycle for which the Center for Responsive Politics performed such an analysis—in which the overall number of traceable donations declined. It’s also likely to be the first midterm since 1990 when the candidates’ campaigns spent less than the preceding midterm election.
The decline in candidate spending, though, is more than offset by the increase in spending by super PACs and other groups that can accept huge contributions from the ultra-rich.
That means that fewer and fewer everyday Americans are choosing to contribute to campaigns. In fact, less than 1 percent of Americans donate today. And who can blame them for feeling disenfranchised when they see their efforts dwarfed by the mega donors.
At the same time, campaigns are spending less while the special-interest groups are spending more. So we now have a system that discourages voters from participating and engaging, while rewarding and encouraging special interests to participate even more.
“[O]ur nation is facing a crisis of liberty if we do not control campaign expenditures. We must prove that elective office is not for sale. We must convince the public that elected officials are what James Madison intended us to be, agents of the sovereign people, not the hired hands of rich givers, or what Madison called factions.”
Those are the words not of some liberal Democrat. That’s the prescient echo of Barry Goldwater from 30 years ago.
By: Mark McKinnon, The Daily Beast, January 5, 2015
“The Changing Role Of Money In Politics”: An Electoral Landscape In Which Financial Balance Has Tilted Dramatically To The Ultra-Rich
The 2012 presidential election was the first to be held in the aftermath of the Supreme Court’s ruling on Citizens United. Too many of us have forgotten that the results of that election were the opposite of what the megadonors had hoped for.
Can’t buy me gov.
That line neatly sums up the dismal showing on Election Day for the fundraisers, super-PAC strategists, and big-dollar donors of the Republican Party. Outside groups spent north of $1 billion this campaign season—bankrolled mostly by a small cadre of wealthy contributors—and yet they and their funders, especially on the Republican side, were left with little to show for it when the sun rose Wednesday morning. The GOP’s flagship super-PAC, Karl Rove’s American Crossroads, had an abysmal 1 percent return on its $104 million investment. Megadonor Sheldon Adelson and his wife, Miriam, invested $57 million in 2012 races; only 42 percent of the candidates who received Adelson support won. Other big donors—say, Romney super-PAC backers—got nothing for their money.
Perhaps we forgot about all of that because the 2014 midterms turned a lot of it around (with a few exceptions, i.e., Eric Cantor).
The 100 biggest campaign donors gave $323 million in 2014 — almost as much as the $356 million given by the estimated 4.75 million people who gave $200 or less…
And the balance almost certainly would tip far in favor of the mega-donors were the analysis to include nonprofit groups that spent at least $219 million — and likely much more — but aren’t required to reveal their donors’ identities.
The numbers — gleaned from reports filed with the Federal Election Commission and the Internal Revenue Service — paint the most comprehensive picture to date of an electoral landscape in which the financial balance has tilted dramatically to the ultra-rich. They have taken advantage of a spate of recent federal court rulings, regulatory decisions and feeble or bumbling oversight to spend ever-greater sums in politics — sometimes raising questions about whether their bounty is being well spent…
Taken together, the trend lines reflect a new political reality in which a handful of superaffluent partisans can exert more sway over the campaign landscape than millions of donors of more average means.
With sweeping victories for the Republicans these megadonors financed, it appears as though that success overshadows their previous failure in 2012 to influence the election outcome.
But it does raise a couple of questions: Are megadonors more effective at influencing midterms than presidential elections? And if so, why? One possible answer to those questions comes from turning our gaze away from who gives the money in order to focus for a moment on how it is spent.
Over the last few decades, as the amount of money in politics has exploded, the vast majority of those dollars have been spent on media – particularly television advertisements. Recently we’ve been learning more about what audience those ads reach. Derek Thompson reported it this way: Half of Broadcast TV Viewers Are 54 and Older – Yikes. As Cecilia Kang pointed out, younger viewers are trending away from traditional television in favor of subscription-based channels and streaming options.
And so it should probably not come as a surprise that a midterm election focused on turning out older voters in local elections is more fertile ground for expensive television advertising.
It will be interesting to see how all this plays out in the 2016 presidential election. I would simply note that all of Karl Rove’s millions of dollars in TV advertising were no match in 2012 to a simple recording by a catering staff at Mitt Romney’s famous 47% event. In the meantime, the Democrat’s largest megadonor – George Soros – has “shifted his giving away from pure politics, preferring to fund causes devoted to building up progressive infrastructure.”
At least until the laws are changed, megadonors are legally able to use their millions of dollars in an attempt to influence elections. The question will increasingly be…what do they spend it on?
By: Nancy LeTourneau, Political Animal Blog, The Washington Monthly, January 3, 2015
“A Crash Course In Congressional Mischief”: Voters Have An Entirely New Reason To Scorn Congress
After years of excoriating Congress for not legislating, Americans got a crash course Tuesday night about the mischief that can transpire when Congress actually fulfills its duties.
With both parties (for a change) committed to passing a spending bill by Thursday to avoid a government shutdown, the comprehensive legislation became a lobbyist’s delight. These omnibus last-minute bills traditionally pass Congress with virtually no debate. And since Barack Obama would never veto legislation to fund the government over minor provisions, anything small snuck into the bill is as good as inscribed into law.
Which brings us to the gem that Matea Gold of the Washington Post discovered on Page 1,599 of the 1,603-page bill. The provision — inserted in the legislation by persons unknown — would suddenly allow a married couple to give as much as $1.56 million to their political party and its committees in a two-year election cycle.
No, that isn’t a typo. Without resorting to Super PACs or taking advantage of a new loophole from the Supreme Court, couples or individuals could give roughly eight times more to their party in 2015 than they could in 2014. As election law expert Kenneth Gross told the Washington Post, “The cost of an ambassadorship just went up.”
Technically, this new giving can only go to three designated areas — convention costs, recount expenses and building funds. But while nothing is certain until regulations are written, it is a safe bet that these categories are likely to be porous. Hypothetically, funds for a new addition to the Democratic National Committee that houses the computers that contain the party’s voter files might also be used to update these registration lists. If nothing else, the parties would no longer have to take money from their general operating funds to pay for these activities.
A case can be made for strengthening the political parties in a Super PAC era. If the parties were too financially powerful in the 1990s when they were the only conduits for unregulated “soft money” contributions, now they are suffering from, in effect, being mere millionaires in a billionaire age. This is especially true as Super PACs are beginning to take on many of the traditional functions of parties like candidate recruitment, voter contact and polling.
It is worth recalling that parties are a force for responsibility and moderation in politics — since their ultimate goal is winning elections rather than enforcing an ideological agenda. Also, as ongoing organizations, the Republican and Democratic National Committees will still be around when the enthusiasms of the current generation of Super PAC donors wane or turn to art collecting and buying sports teams.
As a result, there could have been a robust public debate over the best way to fund political parties in this new electoral environment. Both Republican and Democratic party leaders — as well as the candidates themselves — should come to realize that they are the big losers when the mega-rich dominate campaigns through Super PACs.
It would have been possible to imagine bipartisan legislation in the next few years that would have traded increased legal contribution limits for enhanced disclosure of Super PAC and “dark money” spending. Or even swapped more generous giving for a functioning Federal Election Commission.
Instead Congress in its infinite wisdom decided that “dark money” legislating was a wiser solution. And blaming this one exclusively on the Republicans is probably not true, especially since the Democratic Senate Campaign Committee is currently $20 million in debt.
The result is that the McCain-Feingold legislation, signed with such high hopes 12 years ago, is now as outmoded as Morse Code. And voters (or, at least, that small remnant who still care) have an entirely new reason to scorn Congress. Quite an accomplishment for a group of stealth middle-of-the-night legislators.
By: Walter Shapiro, Brennan Center For Justice, December 10, 2014
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