Follow the Money

That's what Deep Throat said to Bob Woodward in All the President's Men. Good advice. I'm certainly not a specialist on campaign contributions, but Hillary Clinton said regarding Wall Street that "They’re not giving me very much money now, I can tell you that much" after the exchange with Anderson Cooper (video available here), and I decided to check it out. This website provides some comparative data on Hillary and Bernie's donors [I'm assuming the data is accurate and the info I provide is based on that assumption].

Hilary gets 80% of her funds from large donors, compared to 26% from Large Individual contributors for Bernie. At the top of her list the Soros Fund, with more than 7 million, while for Bernie it's Alphabet Inc., with less than 100,000. Not sure how she claimed to receive 90% from small donors.

If we take "Wall Street" to mean the sum of Securities & Investment, Real Estate and Misc. Finance, then she received about 21.5 million from them in this electoral cycle, or about 16% of the funds raised. Number one industry for Bernie is "Retired" (if that can be called an industry) and second is Education, with 1 and half a million respectively. Real Estate and Misc. Finance contribute slightly more than 200,000 of his funds.

 Hilary does receive 50% of her contributions from women, while for Bernie it's about 36%.

You decide who, if anybody, is the Wall Street candidate.

PS: For comparison Jeb Bush gets 93% from big donors, and about 38% from "Wall Street," defined as above. If you add Insurance, then he gets about 46% from "Wall Street." Ted Cruz is also at around 45% of his contributions.

Bob Pollin on Clintonomics

At The Nation. Few important points. As Bob notes Hillary does invoke the mantle of Clintonomics. In his words:

"In trying to burnish her credentials as a can-do populist and to portray Bernie Sanders as a purveyor of naive socialist fantasies, Hillary Clinton has increasingly invoked Bill Clinton’s presidency as her economic policy lodestar."

 And Bill Clinton's program was not really progressive. Again:

"The starting point for understanding Bill Clinton’s economic program is to recognize that it was thoroughly beholden to Wall Street, as Clinton himself acknowledged almost immediately after he was elected."

 His Treasury Secretary, one of them, was Robert Rubin, ex-chairman of Goldman Sachs. And financial deregulation, which is at the heart of two bubbles, and two recessions, continued in this period. Bob says:

"A major driver here was Wall Street’s craze for Internet start-ups... Throughout the bubble years, Clinton’s policy advisers, led by Rubin and his then protégé Larry Summers, maintained that regulating Wall Street was an outmoded relic from the 1930s. They used this argument to push through the 1999 repeal of the Glass-Steagall financial regulatory system that had been operating since the New Deal. The Clinton team thus set the stage for the collapse of the Dot.com bubble and ensuing recession in March 2001, only two months after Clinton left office. They also created the conditions that enabled the even more severe bubble that produced the 2008 global financial crisis and Great Recession."

A good analysis of the limitations of Clinton's economic policies is in Bob's old paper Anatomy of Clintonomics.

Eileen Appelbaum on Private Equity & Retirement Savings

By Eileen Appelbaum

The decline in worker pensions creates a challenge for private equity (PE) funds. The funds currently get about a quarter of their capital from public-sector pension funds and another 10 percent from private-sector pension funds. But defined benefit pension plans, once enjoyed by most private-sector workers, have been largely dismantled by corporations. And public-sector pension plans have come under attack in recent years as part of a larger effort by politicians in some states to weaken or destroy public-sector unions. Private equity is worried that the goose that lays the golden eggs it relies on is on the endangered species list. With the industry so dependent on workers' retirement savings, its future growth prospects are likely to be tied to its ability to tap the estimated $6.6 trillion in 401(k) accounts.

Read rest here.

William K. Tabb on the Criminality of Wall Street

By William K. Tabb

The current stage of capitalism is characterized by the increased power of finance capital. How to understand the economics of this shift and its political implications is now central for both the left and the larger society. There can be little doubt that a signature development of our time is the growth of finance and monopoly power. In 1980 the nominal value of global financial assets almost equaled global GDP. In 2005 they were more than three times global GDP. The nominal value of foreign exchange trading increased from eleven times the value of global trade in 1980 to seventy-three times in 2009. Of course it is not certain what this increase means, since such nominal values can fluctuate widely, as we saw in the Great Financial Crisis. They cannot be compared directly and without all sorts of qualifications to the value added in the real economy. But they do give an impressionistic sense of the enormous magnitude by which finance grew and came to dominate the economy. Between 1980 and 2007, derivative contracts of all kinds expanded from $1 trillion globally to $600 trillion. Hedge funds and private equity groups, special investment vehicles, and mega-bank holding companies changed the face of Western capitalism. They also brought on the collapse from which we still suffer. Ordinary people may not be acquainted with the numbers (and even those best informed are not sure of their significance), but people generally understand in different and often deep ways what has been happening: namely, an ongoing process of financialization that has come to dwarf production.

Read rest here.

Dean Baker on The Promotion of Waste & Inequality By US Finance

By Dean Baker

In the crazy years of the housing boom the financial sector was a gigantic cesspool of excess and corruption. There was big money in pushing and packaging fraudulent mortgages. The country paid a huge price for the financial sector's sleaze. Unfortunately, because of the Obama administration's soft on crime approach to the bankers who became rich in the process; the industry is still a cesspool of excess and greed. Just to be clear, knowingly issuing and packaging a fraudulent mortgage is a crime, the sort of thing for which people go to jail. But thanks to the political power of the Wall Street, none of them went to jail, and in fact they got to keep the money.

Read rest here.

For more on the long-run macroeconomic causes, implications, and effects of US financialization, see recent articles here, here (subscription required) , here, here, here (subscription required), and here (subscription required); for a pertinent sociological analysis, see here

New Book: Private Equity at Work, When Wall Street Manages Main Street

By Eileen Appelbaum and Rosemary Batt

Prior research on private equity has focused almost exclusively on the financial performance of private equity funds and the returns to their investors. Private Equity at Work provides a new roadmap to the largely hidden internal operations of these firms, showing how their business strategies disproportionately benefit the partners in private equity firms at the expense of other stakeholders and taxpayers. In the 1980s, leveraged buyouts by private equity firms saw high returns and were widely considered the solution to corporate wastefulness and mismanagement. And since 2000, nearly 11,500 companies—representing almost 8 million employees—have been purchased by private equity firms. As their role in the economy has increased, they have come under fire from labor unions and community advocates who argue that the proliferation of leveraged buyouts destroys jobs, causes wages to stagnate, saddles otherwise healthy companies with debt, and leads to subsidies from taxpayers. Appelbaum and Batt show that private equity firms’ financial strategies are designed to extract maximum value from the companies they buy and sell, often to the detriment of those companies and their employees and suppliers. Their risky decisions include buying companies and extracting dividends by loading them with high levels of debt and selling assets. These actions often lead to financial distress and a disproportionate focus on cost-cutting, outsourcing, and wage and benefit losses for workers, especially if they are unionized.

See here.

Gerald Epstein: Too-Big-To-Fail Advantage Remains Intact For Big Banks

Gerald Epstein:

Yeah, well, I think there are some noteworthy things. First of all, just to explain what this means, what it means is that these largest banks, like Bank of America, Goldman Sachs, JPMorgan, and so forth get an advantage when they borrow money in the financial markets, because the people who lend them money believe that if they get into trouble, the government will bail them out, that the taxpayers will bail them out. And this has been known since at least 1984, when Continental Illinois Bank almost went under and the government bailed them out, and then the government said, well, we're going to bail out the 11 biggest banks that are too big to fail, and we're going to bail them out in the future. And, of course, that's exactly what happened in the financial crisis of 2007-2008. So when investors lend money to these big banks, we've thought for a long time that they expect that they're going to get bailed out if they get into trouble, so they'll charge less money to these big banks...