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What Goes Around Comes Around:

The Washington Times notes today that many of the recipients of federal bailout funds are also major political donors:

Many of the large American companies that received billions of taxpayer bailout dollars by pleading that they didn't have enough money to lend to customers were, at the same time, spending millions of dollars dispatching lobbyists to influence the federal government.

A Washington Times review of lobbying disclosure reports found that 18 of the top 20 recipients of federal bailout money spent a combined $12.2 million lobbying the White House, the Treasury Department, Congress and federal agencies during the last quarter of 2008.

For instance, the government bought $3.4 billion in American Express Co. stock on Jan. 9 as part of an aid package. In the last quarter of 2008, the company spent more than $1 million on federal lobbying.

The print version of the story also included a chart that listed all of the lobbying expenditures by TARP recipients, but I don't see that chart in the on-line story. General Motors spent about $6 million in lobbying funds over the last two quarters of 2008. Although that seems like a lot of money, it is a drop in bucket compared to the payback that they have received.

BB&T were notable (as is often the case) on the chart because they made no lobbying expenditures (and my impression from what I've read is that they apparently were a bank that was strong-armed into taking TARP funds even though they didn't want them).

Meanwhile, the President of Merrill Lynch has been fired from his position at Bank of America as it has been reported that he accelerated "year-end" executive bonuses to get them paid out before the B of A merger became final--and subsequent request for government TARP funds. He also spent $1.2 million to redecorate his office last year. It really does make me wonder sometimes how these guys can sleep at night.

Once the pork-barrel stimulus plan is finalized I expect we'll see a whole new interesting chart on the links between political contributions and stimulus expenditures.

TRE:
Lobbying is the most profitable kind of investment you can make as far as I know.
1.23.2009 10:10am
Designbot:
This doesn't even prove correlation, let alone causation, unless you compare the money spent on lobbying by companies that didn't receive bailout funds.

This election cycle, Lehman employees have given about $1.3 million to presidential candidates. Only fellow financial giants Goldman Sachs, Citigroup and Morgan Stanley have given more to the presidential hopefuls this election cycle. Lehman employees have made their firm one of the top contributors to both Obama ($370,500) and John McCain ($117,500) this election cycle. The company is also on track to spend more than $800,000 on federal lobbying this year.
1.23.2009 10:25am
glangston (mail):
Yes, that $1 million looks like the best investment Amex has made in a long time.

I'm curious why we're not bailing out credit unions.
1.23.2009 10:26am
Jeffersonian22 (mail):
Makes one reflect on Mencken's assertion that elections are little more than advanced auctions of stolen goods.

As for Thain, I can scarcely believe the avarice of these creeps. Nor can I fathom a board going along with the megalomania of spending $1.2 million to refurbish an office. Are there any adults in charge anymore?
1.23.2009 10:26am
Thales (mail) (www):
"It really does make me wonder sometimes how these guys can sleep at night."

I think it helps to have extremely comfortable beds they bought with money looted from shareholders and laid off employees. Maybe they find the sounds of hungry children and distressed family arguments soothing and play them on recorded loops at high volume or something.

Does any (non-CEO) still think truly independent boards of directors and Lucian Bebchuck's bylaw are bad ideas?
1.23.2009 10:30am
BarrySanders20:
The stimulus package will be an orgy of corruption. Not just the usual DC corruption, but this time magnified by the Chicago Way.

Welcome to your change.
1.23.2009 10:41am
Awesome-O:
This doesn't even prove correlation, let alone causation, unless you compare the money spent on lobbying by companies that didn't receive bailout funds.

Of course. I'd be interested in seeing if there's a statistically significant binary relationship between (donate, don't donate) and (bailout, no bailout) over the set of troubled banks, however those are defined. It would also be helpful to see if there was a relationship between the amount donated and the amount of bailout received, although I don't know which dependent variable would be most helpful: total $ received, percentage of requested money received, etc.
1.23.2009 10:43am
The Cabbage (mail):
The Washington Times notes today that many of the recipients of federal bailout funds are also major political donors

Shocked, Shocked to find that gambling is going on in here.
1.23.2009 10:43am
Thoughtful (mail):
When this is all over, a little change is all we'll have left...
1.23.2009 10:45am
Sarcastro (www):
BarrySanders20 is right. The money already handed out by Paulson is totally a sign of Obama's corruption!

Also, Obama lived in Chicago for a while! Clearly, the government is going to start whacking people and running protection rackets any day now!
1.23.2009 10:46am
Thoughtful (mail):
Ah, Sarcastro...the government is ALREADY whacking people and running protections rackets. They just call it fighting the war on Drugs and collecting taxes.
1.23.2009 10:50am
Sarcastro (www):
Thoughtful I knew my store didn't burn down by accident!
1.23.2009 10:52am
LawMan 5000:
Aren't the largest corporations the most likely to receive the most bailout money? And aren't the largest corporations the most likely to spend the most money lobbying? Even if there is a correlation between the money spent lobbying and the receipt of bailout funds, one would also have to factor in the size of companies, and I think it would make sense to limit it to the financial sector.

In any event, I feel like this study is far from showing direct quid pro quo for bailout funds, though this is not to say that the relationship between corporate America and Washington isn't a too cozy one.
1.23.2009 11:17am
BGates:
Look, an exclamation point! It's proof of witty commentary!
1.23.2009 11:33am
boose:

BB&T were notable (as is often the case) on the chart because they made no lobbying expenditures (and my impression from what I've read is that they apparently were a bank that was strong-armed into taking TARP funds even though they didn't want them).

That wouldn't surprise me, as someone very high up in BB&T (CEO I think) is an objectivist.
1.23.2009 11:46am
bornyesterday (mail) (www):
On a side note about BB&T which made me even happier to bank with them is the fact that they won't provide funds for the construction of any properties that made use of the expanded power of eminent domain in Kelo.

On the whole, from what they said in their 2009 prospectus BB&T has been largely untroubled by the collapse of the housing market and the rest of the financial brouhahas.
1.23.2009 11:53am
Dennis Byron (mail):
The same thing is going on in the information technology sector. See BBC Buys into Sun Spin on Open Source Software

Hold on to your wallets!
1.23.2009 11:54am
JohnK (mail):
You can do lots of thought experiments when you think about the kind of money involved. If you combine the stimulus and the bailut, you get 1.5 trillion. That is enough to pay off three million mortgages at an average of 500K per mortgage. You could give every person in the country $5000 including kids. The list is endless. Even though all of them are kind of cock-eyed ideas, they all make as much or more sense than what we are doing. The only diference is that the above plans do not allow politicians to give money to chronies, which is what this is all about.
1.23.2009 11:56am
Baseballhead (mail):
Look, an exclamation point! It's proof of witty commentary!
Not always.
1.23.2009 11:58am
ShelbyC:

It really does make me wonder sometimes how these guys can sleep at night.



The same way politicians sleep when they piss away billions. On a fancy bed. And at least CEO's spend money the shareholders gave them voluntarily.
1.23.2009 12:01pm
Al Maviva:
The Obama Song, by Will I. Am.


We know the battle ahead will be long,
but always remember that no matter what obstacles stand in our way,
Nothing can stand in the way of the power of millions of voices calling for change.
We want change!
(We want change! We want change! We want change...)

We have been told we cannot do this by a chorus of cynics who will only grow louder and more dissonant.
We've been asked to pause for a reality check.
We've been warned against offering the people of this nation false hope.
But in the unlikely story that is America, there has never been anything false about hope. We want change!
(We want change! I want change! We want change! I want change...)

Yes we can to opportunity and prosperity.
Yes we can to opportunity and prosperity.
Yes we can heal this nation.
Yes we can repair this world.
Yes we can. Si Se Puede


And if taking billions of dollars from ordinary taxpayers and redistributing it to your super-wealthy supporters isn't change, opportunity, prosperity, healing and repairing this nation, then I don't know what is. I just wish I could get me some of that sweet sweet healing, instead of having to pay for it, but oh well, you can't make omelets without busting up some eggs I s'pose.

I'm forced to conclude that you're just one of those vicious obstructors standing in the way of change, Todd.
1.23.2009 12:01pm
Allan (mail):
Everyone here has to stop the criticism.

Lobbying and contributing to campaigns are free speech. It is not evidence of corruption.

At least that is what the party line is. That the companies giving the largest contributions to campaigns and paying the most for lobbyists tend to reap the greatest rewards is simply a happy coincidence.
1.23.2009 12:04pm
Richard Aubrey (mail):
Instapundit linked to a report that the three richest counties in the US are now exurb or suburbs of DC.
For 200 years, he said, we avoided the flow of wealth to the capital. No more.
In a sense, that's what the rust belt did. By coming in at the end of WW II when our competitors were pounded flat, and when infrastructure investment was hard to come by and so existing transport and mfg stayed in the Great Lakes basin and by getting a monopoly on labor, the basin effectively taxed the rest of the nation for its benefit, and, to a lesser extent, the world. I live in a county which , a third of a century ago, the fourth highest per-household income in the nation. Not the zillionaires, but the huge proportion of hourly and skilled trades folks with the UAW.
Didn't last. World got flatter.
Can we flatten the country to DC's detriment? The Big Three didn't have an army.
1.23.2009 12:21pm
DCP:

It really does make me wonder sometimes how these guys can sleep at night.


If he spent $1.2 million decorating his OFFICE, we can only imagine what sort of lavish efforts were undertaken for his bedroom. So I'm guessing the answer to your question of how these guys sleep at night is: "like a kitten with a belly full of milk".

Also, included in the itemized report for that little office makeover: $35,000 for a TOILET and $1500 for a TRASHCAN. Could there possibly be a better metaphor for this TARP fiasco?

Of course I hate the fact that his office spending (and his $250,000/yr personal chauffeur) are getting so much publicity because it detracts from the fact that he doled out $4 billion of TAXPAYER bailout money as bonuses. BONUSES! Not salary, not severance pay, not expense reimbursement...bonuses. For what exactly?

And this was a guy who was brought in to replace Merrill's disgraced former CEO (Stan O'Neal) who got them into this mess to begin with when he stocked the board and executives with his stool pigeon friends and ran the company into the ground with his horrendous financial management. Oh, and according to his handicapping charts, he managed to do all that while playing 27 holes of golf a day. And when they finally fired him (at the onset of this crisis) he walked away with a cool $50 million salary bonus and a $160 million golden parachute. Unreal.

I've said it before and I will say it again, this bailout is not going to work people. And when the final accountings come out and the bills come due and someone actually gets to the bottom of what really went on, there is going to be a revolution in this country. Not an Obama "blow smoke up their asses" revolution, but an actual "storm the Bastille" revolution.
1.23.2009 12:37pm
allymay (mail):
Citing Lehman as a counterexample is bunk.

The Managing Directors and other senior bankers of Lehman have found new homes at other institutions on the bailout list.

This is an industry seeking special treatment, yes. But it is less a series of distinct enterprises than a class of self-serving individuals currying favor from the Democratic Party.
1.23.2009 12:37pm
guest:
Yes, Sarcastro, Todd's point was clearly directed toward Obama, and had nothing whatsoever to do with Barney Frank. How witty and insightful you are. Love your schtick.
1.23.2009 12:41pm
Fub:
Allan wrote at 1.23.2009 12:04pm:
Lobbying and contributing to campaigns are free speech. It is not evidence of corruption.
And it's more effective than public appeals for charity.
1.23.2009 12:55pm
SDProsecutor:
Having just spent a year in a fellowship on Capitol Hill, I could no longer refrain from commenting. This discussion and others like it would be much better informed by includion of ANY sort of evidence as to what type of lobbying was done by the "offending" companies. Like it or not, the personal staff of a member of Congress is informed on issues of importance by lobbyists. In some cases, the actual companies (really the officers thereof) do the informing, but this process is faciltated by lobbyists. Contrary to the misconception obviously commonly held by posters here, lobbying is rarely a Jack Abramoff-style exchange of money for influence. Lobbying is the means by which a member of Congress receives input from those most affected (positively or negatively) by legislation.

Consider for a moment who advises your Senator or Representative: generally a legislative assistant is a 25 year old college grad and part-time law student whose entire working life has been spent on Capitol Hill, first answering phones, then opening mail, then writing form letters. Suddenly after 3 years of this, the person is deemed sufficiently qualfiied to be a legislative aide or legislative assistant, with a broad portfolio of unrelated issues. At this point this person is the member's primary advisor on these issues. If this gives you less confidence in your legislative branch, then you've taken the point well.

Enter lobbyists. Good lobbyists bring a combination of access (who you know) and information (what you know) to a client. And together, the client and the lobbyist let Congress know the effects of their often poorly thought out plans.

Note that I've only referred to the members' personal staffs. Committee and subcommittee professional staff members are generally well-informed. But unless a Senator or Representative is a member of a committee or subcommittee, that expertise is not necessarily available.

Having been in the belly of the beast, so to speak, I want Congress to learn a little about the industries to which it is going to dole out upwards of a million dollars. Maybe that's just me.
1.23.2009 1:00pm
JFred (mail):
This is class warfare!

The managerial class is revolting against the owning classes.
1.23.2009 1:13pm
erp:
"... many of the recipients of federal bailout funds are also major <i>[Democratic]</i> political donors ..." Good think I was sitting down or I might have broken something falling over.
1.23.2009 1:26pm
Constantin:
Having been in the belly of the beast, so to speak, I want Congress to learn a little about the industries to which it is going to dole out upwards of a million dollars. Maybe that's just me.

There's another option here, you know.
1.23.2009 1:41pm
SDProsecutor:
Constantin: well said, sir. For what it's worth, I'm very much against said doling-out. Now if only I had access.... Shoot, I'm about to contradict myself, aren't I?
1.23.2009 1:50pm
RomeoW (mail):
The only way to get rid of lobbyists once and for all is to increase regulation. That'll teach em.
1.23.2009 3:02pm
Randy R. (mail):
And yet, we are constantly told by the Wall street Journal, Fortune, and all the other apologists, that these top managers are actually *worth* the huge salaries and bonuses they are paid.

Would the WSJ ever admit that it might be wrong, or that it might need adjustment? I haven't been following them lately, but have they at least backed off the 'sky's the limit' when it comes to executive salaries?
1.23.2009 3:04pm
Richard Aubrey (mail):
SD,
It appears the congresscritters know all they need to know already.
To put an earlier point somewhat differently, you were so ensconced in the belly of the beast that it has escaped you that an option would be not to use Niagara-size hoses to dole out public money.
1.23.2009 3:14pm
Randy R. (mail):
SD makes a valid point-- that is the reality of congressional life right now. What needs to change is the process,and that's not easy to do.

In a perfect world, the congresspeople and their staffers would actually be experts in the fields in which they regulate. This isn't possible in today's world. The next best solution would be to have experts on staff to educate them. But as we all know, one person's expert is another person's hack.

So probably the best solution is to have lobbyists for all sides -- industry, consumer, environmental, financial, and let them each make their case. together, all sides can actually educate the lawmaker pretty well. The bad part is when there is no counterweight to a lobbyist.
1.23.2009 3:47pm
Dr. T (mail) (www):
He also spent $1.2 million to redecorate his office last year.
A pricier version of rearranging the deck chairs on the Titanic.
1.23.2009 7:21pm
ShelbyC:

So probably the best solution is to have lobbyists for all sides -- industry, consumer, environmental, financial, and let them each make their case. together, all sides can actually educate the lawmaker pretty well. The bad part is when there is no counterweight to a lobbyist.


1. Why not just regulate less?
2. Does that include having all sides buy access with contributions, etc?
1.23.2009 7:57pm
Barbara Skolaut (mail):

It really does make me wonder sometimes how these guys can sleep at night.

Quite easily. The rules that apply to the rest of us don't apply to them, don'tcha know. >:-(
1.23.2009 7:59pm
TruePath (mail) (www):

It really does make me wonder sometimes how these guys can sleep at night.


Probably the same way you can sleep despite sometimes doing poorly at your job. You sleep well despite the existance of starving children in Africa. Even though your salary is probably as much more than theirs as executive salaries are than yours.

I love the way that people (including me) who think nothing of wasting 3 dollars on a fancy coffee at starbucks despite the number of destitute people around the world suddenly getting all righteous that some executive would spend 1.2 million on redocrating his office.

-----

As for whether or not these executives are worth these salaries that's a question that has nothing to do with their worth as individuals and everything to do with whether that extra money makes the company slightly more likely to have better decisions made.
1.23.2009 8:25pm
David Warner:
TruePath,

"As for whether or not these executives are worth these salaries that's a question that has nothing to do with their worth as individuals and everything to do with whether that extra money makes the company slightly more likely to have better decisions made."

I think there's also the small issue of price-fixing among Boards of Directors selected from the CEO class. That union could stand some serious busting.
1.23.2009 10:06pm
lonetown (mail):
The democrats are all pay to play.

These are the paqy to play years!
1.24.2009 6:40am
Pete Freans (mail):
Although that seems like a lot of money, it is a drop in bucket compared to the payback that they have received.

Clearly a great investment...with an average stock market return of 10% annually, I say those companies beat the Street.
1.24.2009 10:16am
Andy Freeman (mail):
Note that refusing to bail out Lehman Bros despite significant campaign contributions doesn't mean that campaign contributions don't have an effect.

A bailout is something of a crapshoot. Just because a specific bailout didn't happen doesn't mean that contributions had no effect on the odds of it happening.

Moreover, Lehman fell early and fast. Now that we're moving slower, grease has more time to have an effect.

Note that lots of industries are hurting, but the financials are the ones getting buckets of money.
1.24.2009 2:56pm
Mac (mail):

If you combine the stimulus and the bailut, you get 1.5 trillion. That is enough to pay off three million mortgages at an average of 500K per mortgage.


John K,

I have been wondering just how many mortgages there can be in this country that are in trouble and wondering if all this money wouldn't just pay them off?
Any idea? Thanks for the math. Very interesting.
1.24.2009 11:38pm
TruePath (mail) (www):
David Warner:


I think there's also the small issue of price-fixing among Boards of Directors selected from the CEO class. That union could stand some serious busting.


I think there are several seperate issues here that tend to get blurred together.

1) What would CEOs be paid if they were selected based on the best availible research about who makes a good CEO instead of an old boys club.

My suspicion is that CEOs of big organizations, like sports stars, would be paid huge sums of money if they were selected by such a process. After all even a slightly higher chance of getting minor decisions right is likely to be worth more than their salary to a huge multinational.

Of course if we were doing this all rationally one might also expect these CEOs to give up a great deal of their freedom while running the company (no staying up late, drinking heavily etc.., daily appointments with the company doc) to minimize the chance of poor deciscions.

2) Does paying CEOs huge salaries bring real companies that much value?

Here I have to say the answer is a firm maybe. After all being super rich means your CEO likely has social connections and access to individuals they would not have if they weren't part of the rich CEO club. Also, given the fact that other huge companies are paying their CEOs these huge salaries it's necessary to do if you want to hire experienced executives. If you don't have any other clue about how to hire a CEO this might be better than nothing and this might still be worth more than the paycheck costs.

In other words if you are a stock holder it might not be worth the risk to you to break the mold and start hiring CEOs in a new way.

3) Are CEOs chosen in an unfair old boys club process where people are given huge salaries based on knowing the board members and other indicators of social status rather than talent.

Certainly. The question is how to reform the system.
1.25.2009 5:57am

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