It's Now Official, Part 2: Political Donors More Important Than Constituents

Yesterday we discussed the travesty and disgrace inherent in our political process where Congressional members are spending far more time trying to raise election campaign funds then they are spending on supporting their constituents and doing valid legislative work. The basis of our discussion, a recent Huffington Post article, revealed the formal process that all Congressional members are held to, down to the details of how many hours every day each member is to spend on fund raising (a lot) and non-fund raising activities (not so much).

One would have hoped that members of Congress were dedicating the vast amount of their time and energy to resolving the major issues of our times. That hope, obviously, would be incorrect. Which explains why our lost war on drugs, our failing public schools, our skyrocketing deficit, and other major issues never get resolved.

The article went beyond this exposure of showing that Congressional members are more focused on their political donors than their constituents. When it comes down to Congressional committee and subcommittee posts, one would have hoped that the politicians staffing those positions would be the most qualified and have the most expertise for each committee’s duties.

For example, one would hope that politicians serving on veterans’ affairs committees had some understanding or experience with veterans and the problems they face. Those that sit on banking committees have some kind of finance or banking experience in their background. Same with highway committees, housing committees, etc.

But again, that hope would be dashed. According to the article, the best members matched to the appropriate committees is farthest from the reality of what goes on in Washington. Consider the following insightful quote from the article

“The quality of a committee assignment is directly related to the amount of dues owed, as black-and-white an admission of the connection between fundraising and policy outcomes as can be found.”

This quote and Huffington Post article introduce a process that I was not aware of. They called it a "dues process" and apparently all members of Congress, from both parties, are given monetary targets that they have to hit and raise money that is funneled to the national Republican and Democratic political organizations.

Apparently, making or missing your dues target determines the quality and quantity of Congressional committee assignments a member of Congress can land. It has little to do with someone’s skills, experiences, or education, it all has to do with raising money to meet your dues target.

And these dues target are not trivial. In fact, they are obscenely high, which probably requires sitting politicians to do much more fund raising and hitting up political donors than actually doing their jobs and serving their hometown citizens. A March 11, 2012 Politico article highlighted how obscene these dues targets were for Democrats in 2011 (as you read them, ask yourself how much energy is diverted to these activities vs. problem solving activities):

• Minority Leader Nancy Pelosi and Minority Whip Steny Hoyer - $800,000 each.
• Pelosi was given the additional assignment of raising another $25 million for the party and Hoyer had to find another $2.5 million.
• Assistant Leader Jim Clyburn was to raise $1.5 million.
• John Larson and Rosa DeLauro (Conn.), Xavier Becerra and George Miller (Calif.), and Steve Israel (N.Y.) were expected to give $450,000 apiece OF THEIR OWN MONEY. Which raises the issue of why anyone would want to be a Congressman for an annual salary of $170,00 when in the case of these sitting politicians, according to Politico, they have to put up $450,000 of their own money for dues. Something like corruption smells here in this math.
• DeLauro and Miller were told to raise another $500,000 for the national Democratic Party while Israel has to raise an additional $10 million.
• Vice chairs Joe Crowley (N.Y.), Debbie Wasserman Schultz (Fla.), Keith Ellison (Minn.), Pedro Pierluisi (P.R.) and Allyson Schwartz (Pa.) were to transfer $300,000 apiece (which I am assuming is also their own money), and their goals for raising money ranged from $300,000 for the latter three to $4 million for Wasserman Schultz and $6 million for Crowley.The lists goes on but you get the idea.

These people are expected to fork over hundreds of thousands of dollars of their own money and then go out and raise tens of millions of other dollars for their mother ship’s political activities. If successful, they apparently get the plum committee assignments, regardless of their abilities and expertise.

This obviously suboptimal process results in suboptimal legislating. The Huffington Post article discusses this disgrace in detail:

One member of Congress said that the fundraising takes up so much time that members don't even have time to become experts on bills they sponsor. "One thing that's always been striking to me is even the members playing a leading role on specific issues actually could not talk about the issues," said the member, who didn't want to be quoted by name. "They didn't have enough knowledge on their own issues to talk about them at length. I'm probably guilty of that." He recalled one meeting early in his career, where he brought several members together to try to hash out a compromise, just as he had done earlier as a state legislator.

"Staff members were all twitching at the discussion, because their principals were saying things that were just flat-wrong or uninformed or wondering aloud about what the industry practices really were," he recalled. "The staff members of course had a pretty good idea. ... The members were sitting around the table having a remarkably uninformed and unproductive discussion."

Pretty scary stuff that a member of the process thinks that the process results in a remarkably uninformed and unproductive discussion. Which probably led to a remarkably uninformed and unproductive piece of legislation that never resolved the war on drugs failure, the high national debt problem, the lack of a national energy program and strategy, etc.

Members of Congress are so distracted into raising ungodly sums of money that pervert our democracy that they themselves end up being unremarkable, uninformed, and unproductive. When a Democratic Congressman confronted Pelosi in a meeting, stating that the dues process and levels were unreasonable, she simply replied that they were not doing enough to raise money. Never mind that not only are the dues levels unreasonable, the whole process and focus on raising money to the detriment of everything else is an abomination.

As a closing to the today’s and yesterday’s exposure of what really goes on in Washington, think about the image the following describes, in the words of a current Washington politician:

 U.S. Senators do not bother going to their party’s headquarters or the rowhouses near the Capital building to make fund raising calls since it is against the law to make fundraising calls from their offices: “But they [U.S. Senators] go outside and sit in their cars and make calls.

Yes, your U.S. Senators, some of the most powerful people in the country and the world, go sit in their cars and grovel for money from political donors over their cell phones. What an obscene and disgraceful image. Paying dues, raising money. Making calls, raising money. Attending fundraisers, making money. With a little bit of uninformed legislating thrown in. No wonder we are in such sad shape as a country.

Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at:

www.loathemygovernment.com

It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

Please visit the following sites for freedom:

http://www.reason.com/
http://www.cato.org/
http://www.robertringer.com/
http://realpolichick.blogspot.com
http://www.youtube.com/watch?v=08j0sYUOb5w

Government Salaries - High Pay, Low Performance

Consider some of the known government screw ups that have recently made the headlines:

- While the financial markets and U.S. economy were imploding, dozens of employees, including top officials, at the government watchdog organization, the Securities and Exchange Commission (SEC), were apparently preoccupied during business hours using their government issued computers to surf the Internet in order to download and view pornography.
- According to the Intelligence report of Parade Magazine on May 16, 2010, the General Accounting Office (GAO) submitted twenty bogus product designs to the Department of Energy (DOE) in order to see if the DOE would certify them as energy efficient. Certification as energy efficient gets a product the coveted Energy Star designation, allowing the company receiving the designation to market their products as energy efficient. One of the designs was billed as a room air cleaner and the design consisted of a feather duster taped to a space heater. Fifteen of the fake designs, including this one, received an Energy Star label.
- According to an article in The Week magazine from the May 21, 2010 issue, Mexico's biggest drug cartel had access to top secret United States drug enforcement information. When a top drug cartel member was apprehended, police found the U.S. Drug Enforcement Administration papers. Apparently the drug cartels have infiltrated U.S. drug interdiction efforts via corruption by Mexican officials.
- And last, but certainly not, least, we are starting to find out how not only BP but several government agencies are to blame for the massive oil slick coming out of the runaway BP well. According to an article by Justin Pritchard of the Associated Press (AP):

• The Federal Minerals Management Service conducted at least sixteen fewer inspections of the runaway BP drilling rig than it should have.
• Other AP investigations have shown that the rig "was allowed to operate without certain safety documents required by the Minerals Management Service for the exact disaster scenario that occurred."
• The cutoff valve that failed has failed numerous times on other rigs since the time that regulators loosened their standards for the valve.
• The Mineral Management Services organization has suspiciously changed the inspection visit numbers related to the BP rig several times over the past month.
• Last year the Mineral Management Services organization cited the runaway BP rig "as an industry model for safety."

- In previous posts we have already covered, in extensive detail, the incompetence's of the Treasury Department, the Federal Reserve Board, the FDIC, Housing and Urban Development, Fannie Mae, Freddie Mac, Senate committees on housing and banking, House of Representatives committees on housing and banking, Federal Housing Authority, and other government agencies for their pitiful performance before and after the banking and housing crash.

Now, consider this low level of performance relative to some numbers that were published in the Tampa Tribune on May 16, 2010:

• The number of Federal employees taking home more than $100,000 in annual salary rose from 14% of the employee base to 19% in just 18 months.
• In 80% of professions where there is both a private industry and Federal government equivalent, the Federal government employee makes more money.
• The average value of benefits for a Federal employee is almost $41,000 while it is only $9,882 for a private industry worker.

Thus, not only are we getting far below satisfactory performance from our government agencies, we are paying them top, top dollars for this horrid performance. Government programs do not deliver what they are supposed to do, government agencies do not even follow their own processes and procedures, classified information leaks out easily, and the biggest economic crisis in eighty years goes undetected until it hits everyone in the face but we still pay top dollar for this incompetence.

As always, nobody in the political class is taking any responsibility for the bad performance. Obama and members of Congress are blaming the government workers involved in the oil slick in the Gulf, much like they do with other government shortcomings, it is never their fault.

"Love My Country, Loathe My Government" woulds address both of these issues. Step 1 would require a ground up, zero based approach to completely reviewing and fixing how government operations function, firing those that do not know how to serve their masters, the American taxpayer. Step 34 would hold those Congressional committee members responsible for such poor government performance and would remove them from their committee posts for severe sub par performances. For example, anyone sitting on the committees that oversaw the Minerals Management Service could possibly be removed for overseeing an agency that utterly failed in the case of the BP disaster.

It is only when people start losing their jobs will there be accountability driven down to all government employees. They are making enough money, accountability should finally become part of their job description.

Our new book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at www.loathemygovernment.com. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

Political Class Financial Follies

As the country slowly moves out of the "Great Recession" the political class has suddenly taken an interest in financial markets and reforms to avoid what we just went through from an economic perspective. As we discussed yesterday, the St. Petersburg Times reported this past weekend that Congressional hearings were held to try and find a preventive solutions to the last downturn. Also, the Senate Finance Committee, spearheaded by Senator Chris Dodd is trying to get a new financial markets regulatory bill passed.

The question is whether we really think Dodd and the rest of the fools in Congress and the administration really have any chance of getting this right. Or is it just another charade of follies that we will all go through, pretending that all is well until the next blowup takes the political class and the Federal government's regulatory agencies by surprise. Consider:

• Bernie Madoff was a suave, smooth talking con man that ran one of the biggest pyramid schemes ever, defrauding his clients of close to $50 billion over a long stretch of years. No one in the government, Congress, the SEC, the Treasury Department, the Federal Reserve Board, etc. had any idea of the ongoing fraud until it was much too late. Thus, thousands of people with the responsibility of protecting investors got it wrong. However, according to any number of news sources, Harry Markopos, an investment analyst with a Boston financial firm, unmasked the fraud about five minutes after his boss assigned him the task of figuring out how Madoff continued to get great returns. Confident of his findings, he sent detailed analyses to the SEC five times, starting in May, 2000, years before the Madoff scheme collapsed. If the government and political class could not do this simple analysis to figure out what was going on when a single person (Markopos) could, what makes us think Dodd and the rest of them have gotten any smarter?
• Speaking of Dodd, he was a member, and later committee chairman, of the Senate Banking Committee for several years and never saw the second biggest financial collapse of all time coming until it hit him in the face. What makes us think that he can reform the financial markets now? He obviously did not understand the financial markets before, since he missed the collapse, I doubt he got so smart that now understands what needs to be done.
• A recent New York Times article, that was reprinted in the St. Petersburg Times, by Michael J. Burry outlined another tale similar to the Markopos story. Burry ran a hedge fund until 2008 and was one of the subjects of Michael Lewis' new book, "The Big Short." According to the article, Burry became suspicious of many facets of the housing market, e.g. very low interest rates, subprime mortgages, etc., and aggressively sent letters to clients of his hedge fund, correctly predicting a housing market collapse in the second half of 2007. Assuming that he was right, Burry made a lot of money for his clients by understanding how things work in the financial market and anticipating the housing and mortgage crash. Thus, Burry did a little analysis and was correct in his conclusions while "our leaders in Washington either willfully or ignorantly aided and abetted the (housing) bubble. And even when the full extent of the financial crisis became painfully clear early in 2007, the Federal Reserve chairman, the Treasury secretary, the President and senior members of Congress underestimated the severity of the problem." Thus, much like Markopos and the Madoff scheme, Burry did a simple analysis to understand the problem while the "best" brains in Washington could not figure it out.
• After the Enron, Worldcom and other financial accounting scandals of the late 1990s, the political class passed the Sarbanes-Oxley Law that was supposed to tighten up accounting standards and regulation so that investors would have a clear view of a company's financial health. Step 48 in "Love My Country, Loathe My Government" calls for the repeal of that law for a number of reasons, not the least of which is the fact that mountains of data and reports are created that are virtually never read by anybody in government. This wastes in incredible amount of American business resources that could be better spent improving our competitive position in the international business market. The "Great Recession" provides another reason for repealing this bill, i.e. it does not work. Two of Wall Street's biggest financial firms collapsed as a result of the housing and mortgage market meltdown. Bear Sterns was formed in 1923 and Lehman Brothers was formed in the early 1860s. These were large, prominent firms that had been successful for decades and decades. However, they went belly up (Lehman disappeared, remnants of Bear Sterns were picked up by JP Morgan) almost over night. Thus, the Sarbanes-Oxley was a total failure here in that it provided no indication of how dire these firms' accounting and financials were until they went poof. Another political class "financial reform" that did not work.

As you can see, the political class financial reforms over the years of just been follies of hope without any understanding of the underlying root causes of the crisis of the moment. Without understanding how things work and what the root causes are, the chance the government can solve any financial markets problem is next to nothing.

Our new book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at www.loathemygovernment.com. It is also available online at Amazon and Barnes and Noble.

Commitment Vs. Involvement: In A Ham And Egg Sandwich, The Chicken Is Involved But The Pig Is Committed

A recent article in the St. Petersburg Times by Robert Trigaux reminded me of this grand old saying. The article was published on Sunday, April 11, 2010 and it went through the cast of characters that were somehow involved with the market crash and recession starting in late 2007. The majority of the article was based on the testimony a lot of these people recently gave in front of the Congressional committee that was investigating the causes of the economic crash.

A few things struck me as I read the article and looked at the pictures of those listed as involved in the crash. The first thing I noticed, and the most obvious, was that all of these people mentioned in the article were involved in the crisis but none of them want to stand up and commit that their actions or inactions were contributing factors to the disaster:

• Alan Greenspan, former head of the Federal Reserve Board, did not take responsibility for the crash even though many people think that under his leadership, the Fed kept interest rates way too low for way too long. During the hearings, Greenspan stated that he was right 70% of the time in his Fed decisions. While 70% might be good for an NFL quarterback for a pass completion record, 70% is not good enough when the economic well being of the nation's citizens are on the line.
• George W. Bush has not taken responsibility for the crash even the seeds of destruction were sowed and allowed to grow during his administration.
• Barney Frank has not taken responsibility for the crash even though he was the House committee chairman that oversaw the housing market, he did not see the biggest economic crash coming since the Great Depression until it hit him in the face.
• Chris Dodd has not taken responsibility for the crash even though he was the Senate committee chairman that oversaw the housing market, he did not see the biggest economic crash coming since the Great Depression until it hit him in the face.
• Henry Paulson has not taken responsibility for the crash even though as Treasury secretary he also did not see the biggest economic crash coming since the Great Depression and when it did hit, he reacted slowly with no apparent strategy for determining which Wall Street firms were to live and which were to die.
• Bill Clinton has not taken responsibility for the crash even though as President he signed laws that separated commercial banking from investment banking, creating the behavior that led to the crash along with legislation that exempted the dangerous derivative financial products from regulation.
• Christopher Cox has not taken responsibility for the crash even though as former head of the Securities and Exchange Commission his organization watched on the sidelines as the banking system almost collapsed completely due to shady and risky financial dealings.
• Richard Fuld has not taken responsibility for the crash even though as CEO of defunct Lehman Brothers Fuld allowed his company get so deeply into risky subprime instruments that its demise was the biggest bankruptcy in U.S. history.
• Raymond McDaniel has not taken responsibility for the crash even though his company, Moody's, incorrectly or falsely rated the subprime financial instruments as financially sound.
• Angelo Mozilo has not taken responsibility for the crash even though as CEO of Countrywide Mortgage his company apparently never met a mortgage customer, no matter how uncreditworthy, that his company would not accept.
• Franklin Raines has not taken responsibility for the crash even though as head of Fannie Mae his big investments in subprime mortgage securities led to a massive taxpayer bailout.
• David Lereah has not taken responsibility for the crash even though as a former economist of the National Association of Realtors, he never saw the housing collapse coming and his book, "Why The Real Estate Boom Will Not Bust" was published just as the real estate boom went bust.
• Robert Rubin has not taken responsibility for the crash even though as Citigroup Chairman he claimed he was ignorant of the risks that nearly destroyed one of the biggest banks in the world, indicating he was either a very lousy executive by not knowing how much at risk his company was at or a very lazy executive who never took the time to understand how much at risk his company was at.
• Charles Prince has not taken responsibility for the crash even though as Citigroup CEO he was just as lousy or lazy as Rubin.
• The Democrats in Congress have not taken responsibility for the crash even though they ran all of the Congressional committees responsible for the overseeing the housing and banking sectors of the economy and consistently rejected dozens of calls by the Bush administration to put stronger oversight onto Fannie Mae and Freddie Mac. They also rejected a request from John McCain in 2005 to rein in the dangerous lending and security practices of Fannie and Freddie. One reason for this resistance was that these two quasi-government organizations were large campaign contributors to Democratic Senators Dodd, Obama, and Kerry.

So all of these important people were involved (the chickens) in the financial disaster but none of them have committed (the pig) to taking responsibility for the results, it wasn't their fault. If it was not their fault, then whose fault was it? This was obviously a big deal since the stock markets suffered extensive setbacks, unemployment is nowhere close to recovering, the Federal deficit has skyrocketed in part due to the large bank bailouts, and the housing market is still in the dump. But no one is responsible. In the above list, no one went to jail, no one paid a large fine, no one went bankrupt, many did not lose their jobs, and no one has an answer of why it went so wrong and why no one in a position to acted to avert or at least mitigate the outcome.

Thus, the first conclusion I draw is that this is just another instance of where the government and the people that are currently running it are not effective and the programs they are responsible for do not work. As stated in "Love My Country, Loathe My Government," we need to do a ground up housecleaning of the people/politicians and the processes that are no longer effective in running this country.

The second conclusion I draw from he article is a little more subtle. As I look at the politicians running the hearings looking into the the causes for the economic crisis and include the list of people from above, I see that almost all of them are older white males. There are no females involved, very few younger people involved, and Franklin Raines is the only African-American who is prominent in the discussion of fault.

Could it be that this group of politicians and business leaders are not diverse enough to see a crisis developing or are too cozy with each other to want to do anything to avert these kinds of disasters? This brings us to Step 45 in "Love My Country, Loathe My Government," a step we have not talked about often in this blog. This step would require the political class to obey and heed all laws in effect that work to guarantee equal opportunity relative to race and sex. Maybe if we had a little more diversity, fresh blood, and fresh ideas involved in the process of running the country we might get some better results. Heaven knows that the current club of people running the country, both in and out of government, may be stuck in a group think mode, making them incapable of foreseeing the future disasters. Said another way, we need more committed pigs and less involved chickens running the country.



Our new book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at www.loathemygovernment.com. It is also available online at Amazon and Barnes and Noble.