“The Real Scandal In Denny Hastert’s Life”: Immersed In The Immoral Swamp Of Washington’s Game Of Money Politics
Washington’s establishment of politicos, lobbyists, and media sparklies are shocked — shocked to their very core! — by the scandalous sexual revelations about Dennis Hastert.
The portly Republican, who’d been Speaker of the House a decade ago, was an affable, nondescript Midwesterner who was popular with his fellow lawmakers. A former high-school wrestling coach in rural Illinois, Hastert was viewed as a solid salt-of-the-Earth fellow embodying Middle America’s moral values. So his recent indictment for paying $1.7 million in hush money to a man he apparently molested during his coaching years has rocked our Capitol.
“I’m shocked and saddened,” said the current GOP Speaker, John Boehner. Likewise, former colleagues from both sides of the aisle were dismayed that “our Denny” would have been engaged in child molestation and now caught in an illegal financial cover-up of that abomination. “This has really come out of nowhere,” exclaimed Rep. Peter King, a longtime ally of the man whom all of Washington considered a straight arrow.
Washington’s gossip mill is spinning furiously over last week’s revelations. Before we join these officials in wailing about Dennis Hastert’s alleged long-hidden molestation, however, let me note that while they are bewildered by his sexual impropriety, they find it not worthy of mention — much less condemnation — that Denny has long been immersed in the immoral swamp of Washington’s game of money politics. The guy they profess to love as a paragon of civic virtue — “the coach,” as Rep. King hailed him — was one of the most corrupt Speakers ever. What about the filthy, backroom affair he has been openly conducting with corporate lobbyists for nearly two decades?
During his tenure as House Speaker, Hastert turned the place into the Willy Wonka Chocolate Factory of corporate favors. By putting campaign cash into Republican re-election coffers controlled by him and his top hitman, Majority Leader Tom DeLay, corporate interests gained entry into Denny’s psychedelic playhouse. With Hastert himself singing “Candy Man,” the favor seekers could help themselves to the river of chocolate running through Congress’ back rooms.
Remember “earmarks,” the sneaky tactic of letting congressional leaders secretly funnel appropriations to favored corporations and projects? Earmarks became the trademark of Hastert’s regime, sticking taxpayers with the tab for such outrages as Alaska’s “Bridge to Nowhere.” Indeed, Denny grabbed a $200 million earmark for himself, funding an Illinois highway near land he owned — land he then sold, netting millions in personal profit.
When he left Congress, Hastert moved just a short limo ride away to become — what else? — a corporate lobbyist. Trading on his former title, personal ties to House members and knowledge of how the chocolate factory runs, he has been hauling in a fortune as a high-dollar influence peddler for makers of candy-flavored cigarettes, Peabody Coal Company, land developers and other giants. And guess what his specialty is? Getting “riders” attached to appropriations bills, so public money is channeled directly to his clients.
Hastert openly traded legislative favors for campaign cash, including profiting personally from his powerful position. And, when he was squeezed out because of the corruption, he didn’t return to the home folks — he became a K-Street lobbyist, continuing to profit to this day by doing corporate favors. That’s how he got so rich he was able to shell out $1.7 million in hush money to the student he abused.
Good ol’ Denny has always thought he was above the law. Just as Hastert should be held accountable for the deep personal damage his alleged molestation would’ve done to his former student, so should he also pay for his abominably indecent abuse of office, his self-gratifying groping of public funds and his repeated, sticky-fingered violations of the American people’s public trust.
By: Jim Hightower, The National Memo, June 3, 3015
“A Picture Of Massive Corruption And Cowardice”: The Decline Of The American Justice System
Jed Rakoff, a former prosecutor, has an interesting piece in the NYRB about why there have been no prosecutions of financial industry employees over the systemic fraud surrounding the financial crisis. The whole piece is worth a read, but here are the main points boiled down:
1) The FBI is consumed with terrorism, apparently cutting their financial fraud investigation force from over a thousand agents before 2001 to about 120 by 2007. Whether that’s justifiable or not, it does remind me of a line from one of the finest action movies of all time: “Jesus man, wake up! National security’s not the only thing going on in this country.”
2) Regulators and law enforcement, especially at the SEC, have been focused on insider trading cases and Ponzi schemes like the Madoff affair, which are easier to investigate and to prosecute. Mortgage and securities fraud, by contrast, are far more complex and difficult.
3) Government complicity. This isn’t a bad point, but Rakoff directs too much blame at subsidies for the poor. As I’ve written in the past, the whole government housing policy regime, most definitely including subsidies for the rich like the home mortgage interest deduction, are to blame as well.
4) A new trend in prosecuting companies instead of individuals. This seems unambiguously true, and it’s a reminder of how new trends in legal theories always seem to move in the direction of increased subsidies and decreased accountability for wealthy elites.
Those points are all fair enough. But taken together, I don’t think they go nearly far enough. As an instrumental account of the details of why these prosecutions aren’t happening, it makes a lot of sense. Though, for the record, they might not even be instrumentally true: according to a new David Kay Johnston report, the Justice Department has been running interference for JPMorgan Chase against Treasury investigators.
But in any case, make no mistake: added up, this is a picture of massive corruption and cowardice at the top levels of our law enforcement agencies. Because regardless of whatever structural trends are happening, no prosecutor with a single fair bone in her body could possible tolerate, oh I don’t know, a minor slap on the wrist for laundering money for drug traffickers and terrorists.
By: Ryan Cooper, Washington Monthly Political Animal, December 27, 2013
“A Big Problem Is Brewing”: This Could Be A Career Ender For Michele Bachmann
With a special investigator soon to be appointed by the chief justice of the Iowa Supreme Court, the ethics cloud hovering over Rep. Michele Bachmann could quickly become a major problem for the Tea Party hero, experts tell Salon.
“This is very serious,” said Craig Holman, a government ethics lobbyist at liberal-leaning watchdog group Public Citizen. “It’s not Watergate, or at least not yet, but these are a series of allegations that are each serious on their own, and when you put them all together, this could be a career ender for Michele Bachmann.”
Ken Boehm, chairman of the conservative-leaning National Legal and Policy Center, told Salon that we should wait to see what investigators find — indeed, no wrongdoing has been reported so far — though he acknowledged the escalating scrutiny could be a major headache for the congresswoman down the line.
The Iowa investigation, looking into whether the campaign improperly paid a state senator, is just one of at least three different probes examining a range of allegations related to Bachmann’s failed presidential campaign, including charges that she improperly used campaign funds to promote her book, that her campaign “launder[ed]” money, and that one of her staffers stole an email list from a home-school organization.
Two former staffers, including her former chief of staff, have agreed to testify against Bachmann, which Holman said is “very unusual” and something that will push investigators at the Federal Elections Commission and the Office of Congressional Ethics, each of which reportedly has its own investigations into the campaign, to take the matter seriously.
OCE can’t issue penalties itself, but instead refers matters to the House Ethics Committee, where the range of potential punishments is huge, from a letter of censure to expulsion from the House, though the committee has a reputation for partisan gridlock and could easily sidestep the matter. FEC violations, meanwhile, come with civil fines, but the commission is even more notoriously ineffectual than the Ethics Committee.
The real punishment, even if no wrongdoing is found, would likely instead come in November of next year, when Bachmann will face off against Democrat Jim Graves, whom she beat by less than 4,500 votes in 2012. The race presents real challenges for Graves, as turnout will be lower without a presidential race, and the district remains the most conservative in Minnesota.
But Professor Larry Jacobs, who runs the Center for the Study of Politics and Governance at University of Minnesota, says the ethics questions are a “big problem” for Bachmann. “There are a lot of things a conviction politician like Michele Bachmann can withstand, and being attacked by Democrats is definitely one of them. But the kind of krypton that will disable her is having her convictions challenged,” he told Salon.
Some supporters will no doubt stick by her, and refuse to believe the veracity of any charges (see: Glenn Beck), but others may not. “These charges are particularly damaging because they cut to the core of her greatest strength among her followers, which is her authenticity. This cloud of questions has now enveloped her in the ‘usual politics’ label and what I’ve heard from her supporters — and this is obviously not a scientific sample — is, ‘she’s just like the rest of them,’” Jacobs added.
For his part, Graves isn’t ready to make an issue of the ethics questions — yet. “We aren’t going to make any assumptions,” he told Salon. “We’re confident in the bipartisan process responsible for investigating this matter. The truth will set you free — or otherwise. I’m just disappointed at how long this issue has had to go on, creating another distraction from the real needs and concerns of Minnesotans.”
Bachmann’s core supporters will probably never vote for a Democrat, but they might stay home, which could be trouble in a low-turnout race like midterms generally are. Still, Jacobs guesses that Bachmann hangs on for another cycle, but barely. And if the ethics questions get worse, that prediction might change.
By: Alex Seitz-Wald, Salon, May 2, 2013
“Treasure Island Trauma”: Living In A World Whose Leaders Seem Determined Not To Learn From Disaster
A couple of years ago, the journalist Nicholas Shaxson published a fascinating, chilling book titled “Treasure Islands,” which explained how international tax havens — which are also, as the author pointed out, “secrecy jurisdictions” where many rules don’t apply — undermine economies around the world. Not only do they bleed revenues from cash-strapped governments and enable corruption; they distort the flow of capital, helping to feed ever-bigger financial crises.
One question Mr. Shaxson didn’t get into much, however, is what happens when a secrecy jurisdiction itself goes bust. That’s the story of Cyprus right now. And whatever the outcome for Cyprus itself (hint: it’s not likely to be happy), the Cyprus mess shows just how unreformed the world banking system remains, almost five years after the global financial crisis began.
So, about Cyprus: You might wonder why anyone cares about a tiny nation with an economy not much bigger than that of metropolitan Scranton, Pa. Cyprus is, however, a member of the euro zone, so events there could trigger contagion (for example, bank runs) in larger nations. And there’s something else: While the Cypriot economy may be tiny, it’s a surprisingly large financial player, with a banking sector four or five times as big as you might expect given the size of its economy.
Why are Cypriot banks so big? Because the country is a tax haven where corporations and wealthy foreigners stash their money. Officially, 37 percent of the deposits in Cypriot banks come from nonresidents; the true number, once you take into account wealthy expatriates and people who are only nominally resident in Cyprus, is surely much higher. Basically, Cyprus is a place where people, especially but not only Russians, hide their wealth from both the taxmen and the regulators. Whatever gloss you put on it, it’s basically about money-laundering.
And the truth is that much of the wealth never moved at all; it just became invisible. On paper, for example, Cyprus became a huge investor in Russia — much bigger than Germany, whose economy is hundreds of times larger. In reality, of course, this was just “roundtripping” by Russians using the island as a tax shelter.
Unfortunately for the Cypriots, enough real money came in to finance some seriously bad investments, as their banks bought Greek debt and lent into a vast real estate bubble. Sooner or later, things were bound to go wrong. And now they have.
Now what? There are some strong similarities between Cyprus now and Iceland (a similar-size economy) a few years back. Like Cyprus now, Iceland had a huge banking sector, swollen by foreign deposits, that was simply too big to bail out. Iceland’s response was essentially to let its banks go bust, wiping out those foreign investors, while protecting domestic depositors — and the results weren’t too bad. Indeed, Iceland, with a far lower unemployment rate than most of Europe, has weathered the crisis surprisingly well.
Unfortunately, Cyprus’s response to its crisis has been a hopeless muddle. In part, this reflects the fact that it no longer has its own currency, which makes it dependent on decision makers in Brussels and Berlin — decision makers who haven’t been willing to let banks openly fail.
But it also reflects Cyprus’s own reluctance to accept the end of its money-laundering business; its leaders are still trying to limit losses to foreign depositors in the vain hope that business as usual can resume, and they were so anxious to protect the big money that they tried to limit foreigners’ losses by expropriating small domestic depositors. As it turned out, however, ordinary Cypriots were outraged, the plan was rejected, and, at this point, nobody knows what will happen.
My guess is that, in the end, Cyprus will adopt something like the Icelandic solution, but unless it ends up being forced off the euro in the next few days — a real possibility — it may first waste a lot of time and money on half-measures, trying to avoid facing up to reality while running up huge debts to wealthier nations. We’ll see.
But step back for a minute and consider the incredible fact that tax havens like Cyprus, the Cayman Islands, and many more are still operating pretty much the same way that they did before the global financial crisis. Everyone has seen the damage that runaway bankers can inflict, yet much of the world’s financial business is still routed through jurisdictions that let bankers sidestep even the mild regulations we’ve put in place. Everyone is crying about budget deficits, yet corporations and the wealthy are still freely using tax havens to avoid paying taxes like the little people.
So don’t cry for Cyprus; cry for all of us, living in a world whose leaders seem determined not to learn from disaster.
By: Paul Krugman, Op-Ed Columnist, The New York Times, March 21, 2013
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