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Tuesday, Jun 19, 2012
Dark Money Middlemen
Updated: Citizens United banned campaign coordination with super PACs, but the GOP may have found a way around
By Alex Seitz-Wald
By now, you probably know that the Supreme Court’s Citizens United decision allows outside groups to raise and spend unlimited amounts of money on elections. You probably know that these groups often don’t have to disclose where that money came from. You may even know that, despite the court’s assurance that this money would be entirely independent of the candidates they’re supporting, there are many ways to coordinate without breaking the law. But you might not know how. In North Dakota, Republicans and outside groups appear to have figured out a clever workaround.
Last week, Crossroads GPS, one of the conservative political nonprofits tied to Karl Rove, dropped $70,000 in ads attacking North Dakota Democratic Senate candidate Heidi Heitkamp, bringing their spending to approximately $140,000 in the race so far. Heitkamp’s opponent is Republican congressman Rick Berg. It would be totally illegal for Berg’s campaign to talk to Crossroads GPS and tell them, say, where he thinks it would be most helpful for them to buy ads. But that doesn’t mean the message can’t be conveyed through an intermediary.
Last month, Berg’s campaign finance filings to the FEC showed that his campaign paid the Black Rock Group, a small but powerful Republican strategic consulting firm in Virginia, thousands of dollars for “communications consulting.” Meanwhile, American Crossroads, the “twin” organization of Crossroads GPS (they have the same staff, same offices and the same mission, just different tax and legal structures), is paying thousands of dollars each month to the same firm for “advocacy [and] communications consulting.”
Black Rock group has three partners. The founding partner, Carl Forti, also happens to be American Crossroads’ political director and has served as Crossroads GPS’ advocacy director. (He also helped start Restore Our Future, Mitt Romney’s super PAC.) Another partner, Michael Dubke, is also the founder of Crossroads Media, which does all the ad buying for both American Crossroads and Crossroads GPS. Black Rock and Crossroads Media even share the same office.
All this might lead one to wonder if the same people at the firm working to help Berg’s campaign are also helping Crossroads’ pro-Berg campaign in North Dakota. One might also suspect that, even though Berg and Crossroads GPS are prohibited from coordinating, that someone placed conveniently between the campaign and the outside group could facilitate the activity on both sides. With just three partners, it seems entirely possible, even likely. But it doesn’t matter, as it would be entirely aboveboard.
“The real scandal here is what’s legal,” Paul S. Ryan, senior counsel at the Campaign Legal Center, told Salon.
When the Supreme Court overruled almost a century of campaign finance laws in its 2010 Citizens United decision and opened the floodgates to outside money, it made two promises to keep things in check: It expected groups to disclose their donors and activists, and it sought to prevent groups from coordinating with candidates. Both restrictions have proven to be farces.
“The statue and the Supreme Court have been very strong on preventing coordination. But the FEC regulations have basically gutted the laws and given us very weak laws to prevent coordination between outside spenders and candidates,” veteran campaign finance watchdog Fred Wertheimer, president of Democracy 21 told Salon. This, “despite the fact that the Court’s entire decision in Citizens United is based on the notion that the expenditures are going to be entirely independent from the campaign,” he added.
Indeed, as Bill Allison of the Sunlight Foundation told Salon, “the FEC has a very narrow definition of what coordination actually is.” As long as a campaign and an outside group don’t directly communicate, and their use of a “common vendor” like Black Rock doesn’t meet several specific criteria, they’re fine. “It kind of boggles the mind, but that’s what the FEC has defined and there’s nothing illegal about it,” Allison explained.
This opens up the possibility for all kinds of things that many average voters may view as obvious coordination, but don’t technically qualify. And while campaigns and outside groups have long used the same firms to provide services like polling, it’s entirely different when it comes to ad making, which has always been more tightly regulated by election law. When you have a tidal wave of outside expenditures, this worries campaign finance watchdogs.
“It makes the coordination rules pretty meaningless,” the Campaign Legal Center’s Ryan said. It’s the worst of both worlds. “We have all of this special interest money that we feared might be in the system, and none of the meaningful restraints on coordination, and very limited disclosure,” he said.
Allison laid out a hypothetical: “If they’re using the same people to buy ads, and the campaign is telling the ad buyer, ‘we want you to buy ads in such and such and such,’ and the ad buyer does that, the super PAC can then say, ‘well, run ads where they’re not running ads, or double their ads,’ or whatever. These guys are professionals and they know how to do this. That’s still not coordination.”
Back in North Dakota, we don’t know that any of this actually is going on, in part because of the other failed promise of Citizens United: disclosure. Crossroads GPS is a 501(c)4 organization, meaning that, unlike super PACs, it doesn’t have to disclose much of anything to the FEC. And we don’t know what kind of work Black Rock does for Crossroads or the Berg campaign. (Forti declined to speak on the record and forwarded Salon to someone else in the group, who did not get back to us before publishing. Crossroads forwarded us to Black Rock).
For its part, the Berg campaign denies any coordination: ”While we do work with Black Rock, there is no coordination between our campaign and outside groups and we have no knowledge of what their plans are. We cannot control what outside groups will do,” communications director Chris Van Guilder said in a statement to Salon.
But Allison said there are plenty of ways for campaigns and outside groups to legally coordinate, even without a common middleman, via consultants. “There can be coordination at the level of consultants, even if they’re not at same company,” he said, noting most of the operatives know each other socially or have worked together. Super PACs can also find out where campaigns they’re supporting are buying ads by contacting their opposing candidate, ironically, which keep track of such information.
And in the new world of campaign finance, no one is better positioned to facilitate GOP non-coordination coordination than Forti, who sits in the middle of a powerful nexus of outside spending groups and GOP political firms all run out of the same office suite in Alexandria, Va. Dubbed “Karl Rove’s Karl Rove” by Politico, Forti is a key player in the world of Republican independent expenditure. ”I don’t know of anybody who’s got as important of a role with the major outside organizations, both in 2010 and in 2012,” Charles Spies, the treasurer of Restore our Future, told Mother Jones.
Continue ReadingCl
I've said for years that this is the proper response for all those of honor (although it leaves the public with one less properly trained reporter). Of course, that's hardly the crowd we've had in charge since the Cheney/Bush debacle as was easily seen in Jamie Dimon's testimony to Congress the other day when he essentially told them their role was to ask him for permission to change any procedures affecting (even in the slightest) his domain.
Honorable men. Do I hear the strains of "God Save the Queen" again? Or was it "King?"
So Long, Suckers — I’m Leaving Wall Street
Commentary: Some lessons from 15 years observing the industry
David Weidner, MarketWatch
NEW YORK — After covering the tobacco industry for three years in North Carolina, I moved to New York in 1997 to cover a really dirty business: Wall Street.
Fifteen years after I made that switch, I’m moving on again. More on that in a moment.
Wall Street, like just about everything else, including me, has changed a lot in that time. Also, it hasn’t changed a bit. What follows are 15 takeaways from my time living in New York and covering the financial industry and the markets.
Simple is better: For 60 years, a 37-page document kept the financial system relatively safe. It was called Glass-Steagall.
In the 13 years since it was repealed in the name of modernization, we’ve seen a tech bubble and the greatest financial crisis since the stock-market crash of 1929.
You can’t time the market: Also, technical analysis is phooey. Momentum plays are foolish. Anyone who wants to sell you a plan to beat the market is full of baloney. Investing schemes are exactly that. As I’ve written before, some people will tell you that you can hedge your bets. But insuring trades has never made sense to me. If you have to spend money to hedge a bet, it probably means you can’t afford to invest the money.
When it comes to markets, what can go wrong, will, and bubbles happen. The problem is we never know which is which until it’s too late.
Timing is everything: Market journalism should be written in two ways. The first would give you the trader’s perspective. The second would be for the long-term, buy-and-hold investor. Too often, we’re caught up in the daily fluctuations in our portfolios. What really matters is what the investments are worth when we need them.Pay is the problem on Wall Street: Why is it that we know the names of Kweku Adoboli, Jerome Kerviel, Ina Drew, Bruno Iksil and Nick Leeson but not the names of all of the “rogue” traders who pulled off massive gains on their speculative bets? The answer, obviously, is that winners get promoted. Only losers are hung out to dry.
Too cozy for comfort: It’s less of a problem since the financial crisis, but the business media are still too cozy with the powerful on Wall Street to do their jobs correctly.
The media still fawned over Wall Street stars such as Jamie Dimon at J.P. Morgan Chase & Co. JPM -0.06% ; Eliot Spitzer, former New York governor and attorney general, and Jimmy Cayne of Bear Stearns. Why?
They all dished tips or dirt on their rivals. Access journalism still dominates the landscape, and you — the reader — suffer for it.
Mutual funds are a waste of time: The fund industry was my first beat in New York. Here’s how it was explained to me: You buy a fund. The fund trails its index but you pay a management fee and other fees that are usually diminishing returns. You will pay a fee to buy the fund, or exit it, or both. Index and exchange-traded funds are the best thing to happen to investors since cash.
Donald Trump: Living in New York, we get a warped sense of how regular people view big finance. Most Americans, when they think of the rich and powerful of Wall Street, don’t think about Lloyd Blankfein, the CEO of Goldman Sachs Group Inc. GS +2.93% , or Steven A. Cohen of SAC Capital, one of the most powerful hedge funds in the world.
They think of Donald Trump, a reality-TV star of questionable wealth who’s had several business failures and bankruptcies and is generally considered a credit risk to bankers on Wall Street.
Sophisticated investors? They think of Warren Buffett.
Break up and make up: Mergers and acquisitions are a necessary evil in the modern corporate world. That said, most of these deals are put together for the wrong reasons. CEOs and top managers get huge payouts. Investment bankers get huge fees.
Shareholders get paid off. On the flip side, these deals eliminate competition, are used to pad or obfuscate financial results. They almost always cost jobs, disrupt business, make customers miserable. And studies consistently show, their biggest selling point, “efficiencies,” almost never pan out.
Jamie Dimon: He is the smartest guy on Wall Street — and the most arrogant.
‘He was like a father to me ... he would do anything for money’: This is what I was told by a close “friend,” “colleague” and understudy to a big-shot investment banker to the financial industry (he advised banks on mergers). This Mr. X was rumored to be leaving for a rival bank for a significant amount of money.
The first part of the quote illustrated to me the bizarre but nurturing environment between bankers. There was a lot of loyalty. The second part of the quote showed the only thing that was more important than anything else.
. . . You can argue that the system is out of whack, rewards thieves and has paid off and controls the political system. It’s true that in the financial crisis of 2008, the system broke down and banks stopped providing the services for which we paid. . . .
Pay attention: Following the scandals, the controversies and the issues on Wall Street can be infuriating, boring and discouraging. Working to change the system may seem impossible. But if you’ve read this far, you obviously are at least curious. Or a glutton for punishment. You have what it takes.
Read the rest of the essay here.And though I will be gone for a couple of weeks, when I return, my columns will come from San Francisco, where I’ll be taking a different angle on finance. Until then, remember: Greed is good, but good is better.
And here's some more food for thought.
From The Guardian:
Environmental activists ‘being killed at rate of two a week’
Ron Paul: I take Social Security checks but will eliminate it for others
Krugman: Ireland ‘doing everything the Right wants,’ and ‘it’s not working’
Beat Back Obesity
There’s no scientific reason junk food should cost less than whole grains, fruits and vegetables. After all, the former are the product of a mechanized process relying on an entire industrial system, while the later can be grown directly out of the ground by almost anyone.
Yet, junk food consistently beats natural foods in the price competition. Why? It’s all about the subsidies.
As a the U.S. Public Interest Research Group’s “Apples to Twinkies” report shows, your taxpayer dollars subsidize junk food and artificially deflate the cost of that junk food so that it undersells everything else.
“Between 1995 and 2010, $16.9 billion in tax dollars subsidized four common food additives — corn syrup, high fructose corn syrup, corn starch, and soy oils.” At the same time, PIRG points out that “taxpayers spent only $262 million subsidizing apples, which is the only significant federal subsidy of fresh fruits or vegetables.”
To put those numbers into real-world terms, “if these agricultural subsidies went directly to consumers to allow them to purchase food, each of America’s 144 million taxpayers would be given $7.36 to spend on junk food and 11 cents with which to buy apples each year — enough to buy 19 Twinkies but less than a quarter of one Red Delicious apple apiece.”
While studies show that changing this subsidy structure would be no cure-all for obesity, there’s no evidence to suggest that keeping it in place does anything but make the obesity crisis worse — and there is evidence that changing the subsidies would make things better. This isn’t surprising; it’s basic economics.
Think about it: If subsidies for commodity crops that create junk food were redirected into subsidies for natural foods, it would radically change the market incentives for healthful eating. Sans the subsidies, industrial food corporations would no longer be able to price processed foods at artificially lower prices than their natural competitors. Instead, healthful foods would have the price advantage — and, quite likely, bigger market share.
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