I have long thought that corporate money in politics is corrupting. Well before Citizens United or McCutcheon even. Corporations are beholding to their shareholders (many of which are in the executive suites) and not the American public. Government needs to be responsive to the people. I mean living, breathing people and not the corporate “person.” I view a very big responsibility of government as a champion of the people and to intervene when the greed of a few negatively impact the public at large. A little later I will relate what happened in the Financial Services Committee just a few days ago. But first a little walk down memory lane.
It was the PBS Democratic debate on February 10 in Milwaukee when Clinton got this question:
WOODRUFF: We're going to move on. Secretary Clinton, your campaign has recently ramped up criticism of Senator Sanders for attending Democratic Party fundraisers from which you say he benefited. But nearly half of your financial sector donations appear to come from just two wealthy financiers, George Soros and Donald Sussman, for a total of about $10 million.
WOODRUFF: You have said that there's no quid pro quo involved. Is that also true of the donations that wealthy Republicans give to Republican candidates, contributors including the Koch Brothers?
There was a collective gasp in the Clinton Twittersphere (@Karoli, @joanwalsh, others) How would she answer? To anyone who’s followed politics there really is only one answer. But Clinton didn’t give that answer.
CLINTON: I can't speak for the Koch Brothers, you're referring to a Super PAC that we don't coordinate with, that was set up to support President Obama, that has now decided that they want to support me. They are the ones who should respond to any questions.
Let's talk about our campaigns.
She parried like an Olympic fencer, well, maybe obfuscated is a better word. Right to the “Super PAC, we can’t coordinate (wink, wink) with them” defense. She did not answer the essential question “does money corrupt ONLY Republicans?”
As the bill I will be highlighting touches on Dodd-Frank, allow me a brief aside. The next time you hear someone say “Dodd-Frank is the toughest piece of bank legislation in xx years” maybe they should be asked why (like Sen. Warren did) there are still almost two dozen rules to be written in this six year old piece of legislation? More recently five of eight big banks failed the "living will" test. Yet they are given extensions to update their plans. Dodd-Frank already gives them YEARS to correct the situation. Meanwhile the banks lobby constantly to change those rules. "Each plan has shortcomings or deficiencies," said FDIC Vice Chairman Thomas Hoenig in a statement. "No firm yet shows itself capable of being resolved in an orderly fashion through bankruptcy. Thus, the goal to end too big to fail and protect the American taxpayer by ending bailouts remains just that: only a goal." Thanks for indulging my digression, back to the corruption.
The Investment Advisers Modernization Act of 2016 is an effort to shield private equity and hedge funds from SEC scrutiny that was included in Dodd-Frank. On Friday June 16, this rather odious bill (HR 5424) was voted out of committee with the support of 12 Democrats. Which sort of goes to show, that yes, Democrats can be bought too. Now if you are going to stick with the Scalia/Clinton defense that corruption is only a direct quid pro quo (payment for a specific vote) you need not read any further. If you believe that the steady faucet of campaign funds is every bit as “influential” (there’s a less criminal sounding word) then Naked Capitalism has the full story, but here’s a taste.
Among other things the bill allows private equity and hedge funds not to make complete disclosures in the prospectus of the products they are selling. It even takes the next steps and allows for the complete purging of all electronic files of what they said or wrote while selling their products. So, it allows for destruction of evidence of fraud.
As professor Jennifer Taub stated in her testimony on the bill last month:
Just when private equity funds are in the sunlight thanks to Dodd-Frank and many have been exposed in SEC examinations as in violation of the law, you are now proposing that they be able to hide their tracks. Instead of encouraging a culture of compliance, this bill would provide a loophole for investment adviser recordkeeping requirements. Subjecting communications to confidentiality agreements or keeping them in-house would allow advisers to destroy critical investment records…
The Investment Advisers Modernization Act of 2016 is misnamed. Instead of ushering in modernity, it would send the SEC and investors back to the Dark Ages. Like the other bills today, it is misaligned with the hearing’s title, “Legislative Proposals to Enhance Capital Formation, Transparency, and Regulatory Accountability.” This bill would not enhance capital formation. Instead it would undermine investor protection and trust, which could inhibit or drive up the cost of capital. It would not promote transparency, but allow certain private equity advisers and other private fund advisers that have been exposed as lacking in recent SEC examinations to hide their tracks. It would not encourage regulatory accountability. Instead it would punish regulatory success, depriving the SEC of the information and tools it has been using to monitor system-wide risks, identify firm-specific risk, investigate fraud, and enforce the law.
Here are the Democrats that supported the bill. If any of them are yours, give them a call and ask for the reasoning behind their vote.
Brad Sherman (CA-30) The FIRE (Finance, Insurance, & Real Estate) sector was by far his biggest contributor in the 2014 race. Over $400k.
Gregory W Meeks (NY-05) FIRE was practically his only contributor in 2014 with almost $600k. Goldman Sachs his top contributor at $21k. Meeks has constantly been bankrolled by Wall Street, so much so that he rarely has any opposition yet he hauls in buckets of cash.
David Scott (GA-13) FIRE was far and away the biggest contributor in 2014 at almost $500k. The Blue Dog PAC his single largest contributor.
Edwin Perlmutter (CO-07) FIRE clocks in with an astonishing $800k during 2014. Four of the five top industries were Insurance, Real Estate, Securities/Investments, and Commercial Banks. Number 2 individual contributor was JPMorgan Chase. His races are virtually uncontested but still receives massive donations.
James Himes (CT-04) Four of his top five contributors in 2014 were banks. GS, Citigroup, Chase, and UBS. All in all FIRE spent $1.4MM on Jim in 2014. This backing has allowed him to outspend opponents in ranges of 50% to 100%.
John Carney (DE) Now running for Governor. It’s a small state, but still FIRE contributed $200K for his 2014 bid. Number one contributor? New Democrat Coalition. Followed closely by Chase. He was able to outspend his opponent 50-1.
Terri Sewell (AL-07) FIRE contributed over $550k during the 2014 cycle, dwarfing all other sectors, as she ran unopposed. Rep Sewell was able to dwarf opposition spending so much in the previous two cycles, no challenge was mounted this past cycle.
Bill Foster (IL-11) is a co-sponsor of this Republican bill. Foster was recruited by a Third Way, Blue Dog named Rahm Emanuel. Touted as a “progressive” initially, FIRE is only the second highest contributing sector in 2014. Still Securities/Investments, Real Estate, and Insurance are ranked 4, 6, and 7 respectively when looked at by industry. And he only had to outspend his opponent 3-1 to eek out a five point margin in the wealthy suburbs of Chicago.
Patrick Murphy (FL-18) A former Republican (converted in 2012 when he ran against Allen West), now running for Senate as a Democrat. He has been endorsed by the DSCC and Obama over Alan Grayson in the primaries. I guess not being a “life-long” Democrat is OK for some, if you vote correctly. In 2014 FIRE gave him $1.2MM, his biggest contributing sector.
John Delaney (MD-06) In 2014 FIRE funded Delaney at a rate six times the nearest sector, Lawyers & Lobbyists. In his top 5 contributors are Black Rock, HHC Finance, Chase, and the American Bankers Assoc. which together donated well over $120k. He won in 2012 using that banking cash at a rate of 3 to 1 over his opponent. 2016 is already shaping up as a boon year.
Krysten Sinema (AZ-09) FIRE was good to Krysten in 2014 ponying up over $500k. This year she already has a strong showing from insurance and finance and these are in her top five contributors.
Joyce Beatty (OH-03) FIRE lavished almost $290k on Rep. Beatty in 2014. Insurance, Commercial Banks, Securities/Investments, and Real Estate all in the top 10. The sector has already given over $225k this cycle with the industries listed above now in the top 7. She walloped her opponent in 2014 who was only able to spend about $3,000. Yet she continues to amass cash.
Juan Vargas (CA-51) received $225k from the FIRE sector in 2014. I will note however that in Juan’s case, most of it came from insurance and not Finance. He too ran unopposed in 2014. Then why all the donations?
Who knows, maybe this bill addresses valid public interest concerns. ;-)
