Crony Capitalism & How do you know a politician is lying

Posted By on November 16, 2011

How do you know a politician is lying? Well we’ve all heard the old “lips are moving” answer … it is even more true today than in the past. As someone who really wanted to believe that people – voters – could make a change … I’m becoming more and more disheartened. (Disclosure: I didn’t vote for President Obama, but admittedly want to believe we were getting a different kind of President focused on transparency)

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Besides the November 13, 2011  “60 Minutes” follow up on insider trading and how congress has exempted itself from the rules governing about everybody else with inside information as it pertains to the financial markets, we get a peek at how the Obama administration is playing the game too. This is the the same politician who’s campaign promise in 2007 would be to “change in the way business is done in Washington, DC.” Obviously after 3 years President Obama didn’t even give lip service to “changing the way business is done” and is even more in-bed with donors and the left’s political agenda

More than two years after President Obama took office vowing to banish “special interests” from his administration, nearly 200 of his biggest donors have landed plum government jobs and advisory posts, won federal contracts worth millions of dollars for their business interests or attended numerous elite White House meetings and social events, an investigation by iWatch News has found.

These “bundlers” raised at least $50,000 and sometimes more than $500,000 in campaign donations for Obama’s campaign. Many of those in the “Class of 2008” are now being asked to bundle contributions for Obama’s re-election, an effort that could cost $1 billion. (link)

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As for their business dealing … just look at who 80% of all the DOE loans went to …  Obama backers.

… $16.4 billion of the $20.5 billion in loans granted as of Sept. 15 went to companies either run by or primarily owned by Obama financial backers … (link)

To top this, the folksy billionaire investor and Obama supporter Warren Buffett shrewdly bent the ear of those in Washington DC to benefit his large bets on American banks and even brought insiders (congressmen and women) along for the ride.

As the political debates surrounding the proposed $700 billion TARP bailout bill heated up, Buffett maintained an appearance of naivete, an “aw shucks” shtick that deferred to the judgment of politicians.  “I’m not brave enough to try to influence the Congress,” Buffett told the New York Times.

Behind closed doors, however, Buffett had become a shrewd political entrepreneur. With his Goldman bet in place, the billionaire exerted his considerable political influence in a private conference call with then-Speaker of the House Nancy Pelosi and House Democrats. During the meeting, Buffett strongly urged Democratic members to pass the $700 billion TARP bill to avert what he warned would otherwise be “the biggest financial meltdown in American history.”

Throw-Them-All-Out-by-Peter-Schweizer4Buffett had a strong financial interest in the bailout’s passage, says Schweizer. “If the bailout went through, it would be a windfall for Goldman. If it failed, it would be disastrous for Berkshire Hathaway.”

Yet Buffett had little reason to worry; his insider political connections afforded him two guarantees. First, many members of Congress were themselves investing heavily in Berkshire Hathaway throughout the bailout talks–a move that may simply have been a good investment in an unsteady time, or else a shrewd exploitation of unique information. Senator Dick Durbin (D-IL), for example, snatched up $130,000 worth of Berkshire Hathaway stock.  Senator Orrin Hatch (R-UT) also bought shares in Berkshire Hathaway, as did Senator Claire McCaskill (D-MO), who purchased half a million dollars’ worth just days after the Wall Street bailout bill was signed.  Second, Buffett knew he had an ally in the surging Barack Obama. Buffett had backed Obama in 2008. And as Obama has himself conceded, “Warren Buffett is one of those people that I listen to.”

When the TARP bailout passed, Berkshire Hathaway firms received a staggering $95 billion in bailout cash from U.S. taxpayers. In total, TARP-assisted companies made up almost a third (30%) of Buffett’s entire publicly disclosed stock portfolio. The payoff:  by July 2009, Buffett’s Goldman bet and his congressional jawboning had yielded profits as high as $3.7 billion.

A new book from Peter Schweizer, Throw Them All Out, exposes much of the inside Washington game. This being highlighted, along with recent stories, has me thinking that the Occupy Wall Street movement needs to cast a wider net and re-focus their anger. It’s not capitalism that is the problem … it’s the crony capitalism.

Comments

  • I’ll agree that capitalism in itself isn’t the problem, although I do think you need to restrict the amount of influence that one can have over the system, or crony capitalism can reinstall itself. (I personally feel that a mixture of capitalism and socialism is best, though – use capitalism where possible, socialism (preferably at the most local level possible) where capitalism hurts the citizens (infrastructure and healthcare, IMO, being the best examples).) Pure capitalism gives you the utopia that is Somalia, pure socialism gives you the utopia that is the USSR.

    I would say that somewhere, there’s a threshold at which point it goes from “rich” (where people have a very comfortable life, and don’t need to worry about money) to “filthy rich” (where people have so much money that they can exert undue influence over those in power, or gain undue power themselves). Rich is perfectly fine, filthy rich is where crony capitalism comes into play, and is extremely dangerous to our society.

    Two ways to keep the filthy rich from turning their money into power: restrict their speech (now that’s a can of worms I don’t want to open – and those in power are restricting the LITTLE GUY’S speech now), or keep them from being filthy rich.

    I’ll note that I’m of the belief that “constant growth” economies are doomed to fail as long as we’re a primarily Earth-bound species, so a lot of my economic beliefs are based on reversing such constant growth policies.

    So, when dealing with the filthy rich (you would basically have to figure out the point at which someone becomes filthy rich, and starts having more than their share of power over government and those less financially well off), I’d say that a taxation curve that gradually rises before the filthy rich line, yet steeply rises once you get to the filthy rich line would be best. Now, once you’ve collected all that tax money… have a budget that’s stuck to. Once you’ve paid that budget, DECIRCULATE the excess tax money. If you don’t need constant growth, deflation doesn’t hurt you… and now you’ve given back the excess to everyone, maintained political and societal stability, prevented massive wealth disparities, while still rewarding those who deserve it.

    (Also, why gradually rise before the filthy rich line? Well, if you’re making a lot of money, you make it using the infrastructure that you’d be funding, so it’s only fair that that you pay a fair share of that infrastructure’s costs.)

    • Excellent comment Eric. I do enjoy reading your opinions when they are well thought out. So many from your generation just come from the disgruntled mob atmosphere … believing the grass is greener in a different pasture (socialism). Your comment reminds me of the many discussions I had with one of my best friends way back in the 70s and 80s. He lived his beliefs … getting a real world perspective living under different forms of government teaching in several countries and at one point ejected from China during the Beijing uprising. I lost touch with him for many years and have just recently reconnected online — looking forward to getting together someday. (Charlie Matthews .. sitting next to me, second from the left).
      http://mydesultoryblog.com/2010/02/archiving-nicknames-the-fearsome-foursome-and-the-fiberpile/

      Thanks again for your thoughts on the “filthy rich” …  😉 … BTW, see if you can guess what kind of car was I sitting on?

Desultory - des-uhl-tawr-ee, -tohr-ee

  1. lacking in consistency, constancy, or visible order, disconnected; fitful: desultory conversation.
  2. digressing from or unconnected with the main subject; random: a desultory remark.