The Contrarian

“In the investment markets, what everyone knows is usually not worth knowing.”

“Greasing The Wheels”–Political Contributions

The path to getting yourself and your business heard in Washington, or in any capital  of the world, is to “grease the wheels.” Political contributions is one way. But to make them work, the contributors hire lobbyists. They remind the politicians of the I.O.U.s they have to take care of.

Many years ago, I read the book of a former lobbyist. It is still valid, and just as shocking as it was then to find out who common the practice of giving payoffs to powerful politicians for favors. Here is the book, still available on Amazon:

The Washington Pay-Off; an Insider’s View of Corruption in Government Paperback
by Robert Winter-Berger (Author)

Below is an excerpt of an article from listing the huge amounts of money flowing to Washington by major financial firms, hedge funds, etc. The ‘contributors’ are listed. Read on.

The top 20 performers (contributors):

Who is Number 1? Goldman Sachs? Wells Fargo? Nope. The National Association of Realtors (NAR). It’s trying to get the government to inflate the housing market in myriad ways, for instance by dominating the mortgage industry, including guarantees and mortgage-backed securities, thereby subsidizing mortgage rates. It’s all about Realtors making more money because commissions are fatter if extracted from higher home prices. And the NAR is very concerned that the government might be cracking down on pandemic money laundering in the housing sector.

The NAR gave more than twice as much as the next guy in line, namely a quant hedge fund, Renaissance Technologies, followed by another hedge fund, Paloma Partners, followed by another hedge fund, Elliot Management, followed by the banking trade association, American Bankers Association.

Commercial banks are further down on this list (campaign contributions and lobbying expenses combined):

  1. National Association of Realtors – $118,622,462
  2. Renaissance Technologies – $53,479,983
  3. Paloma Partners – $41,334,000
  4. Elliott Management – $28,020,354
  5. American Bankers Association (ABA) – $25,750,687
  6. Bloomberg LP – $25,528,952
  7. Soros Fund Management – $24,642,840
  8. Pritzker Group – $23,668,814
  9. Prudential Financial – $19,021,920
  10. Securities Industry & Financial Market Association (SIFMA) – $16,006,600
  11. Starr Companies – $15,316,251
  12. Stephens Group – $15,193,306
  13. Citadel LLC – $14,846,004
  14. Wells Fargo – $14,755,343
  15. Citigroup Inc – $13,676,918
  16. Hendricks Holding Co – $13,499,525
  17. MetLife Inc – $13,196,824
  18. New York Life Insurance – $12,792,478
  19. Goldman Sachs – $12,414,029
  20. Investment Company Institute (ICI) – $12,382,079

The report lists many more entities by name. These are just the top 20.

Clearly, Goldman Sachs, near the bottom of the above list, doesn’t need to spend that much money on campaign contributions and lobbying. It gets what it wants by other means, for example having its ex-executives play major roles in the administration and at the Fed.

This chart of the past 9 election cycles shows how overall performances have improved over the years. So this is certainly an exciting growth sector in the US economy, however crummy the rest of the economy or corporate earnings might be. It also shows how the $2 billion were divided up between “campaign contributions” and “lobbying”:

Here are the top five recipients in the Senate:

  1. Senator Marco Rubio (R-FL) – $8,687,969
  2. Senator Ted Cruz (R-TX) – $5,482,011
  3. Senator Charles E Schumer (D-NY) – $5,345,563
  4. Senator Rob Portman (R-OH) – $4,158,259
  5. Senator Pat Toomey (R-PA) – $3,918,262

And here are the top five recipients in the House:

  1. Representative Paul Ryan (R-WI) – $5,727,069
  2. Representative Kevin McCarthy (R-CA) – $3,397,980
  3. Representative Patrick Murphy (D-FL) – $2,218,697
  4. Representative Joe Heck (R-NV) – $2,167,660
  5. Representative Chris Van Hollen (D-MD) – $2,149,471

The chart below shows campaign contributions to Democrats and Republicans, based on contributions that were identified by party (only a portion are), with the federal election cycle in solid columns and the in-between years in striped columns.

The Financial Crisis is already forgotten, except the key element for the financial sector, including the housing sector: they got bailed out by the government and to a much larger extent by the Fed – and they continue to get propped up with the still ultra-low interest rates and the Fed’s gigantic pile of securities, including mortgage-backed securities, that it has acquired during the phases of QE.

So it’s no big deal, apparently, for these players if there is another financial crisis. But deregulation must happen. Financial reforms must be rolled back. The housing market must be subsidized more than ever. Bonuses, stock-based compensation, share repurchases, and commissions beckon. What is in reality a relatively small amount of money – just a few billion bucks, a pittance really – must be spent by the industry to reap the huge payoffs. As the old saw goes, you have to spend money to make money.

But in the real economy, where has all the optimism suddenly gone? Read…  Atlanta Fed GDPNow Forecast Spirals Down in Amazing Manner

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