Meet me in the Lobby

Running for office takes money. Lots of it. And given how we have candidates running earlier – extending the length of the campaign and multiplying the need to generate money earlier before anyone has a clear lead – the access points for special interests armed with cash have multiplied as well. People start talking about the next election the moment the last election is over.

And if you are running sooner, before the field is set, you have less to offer a contributor, because you are nowhere near the finish line… in fact, you may not even be on the starting line. So with less to offer, many nascent candidates need to offer more to special interests to get those dollars. Clearly, the populist campaign contributions that flow later in a political campaign are almost non-existent at the early stages. The more passionate your point of view (even if that passion is corporate greed), the greater your willingness to embrace candidates earlier, before candidacies are homogenized into the mainstream of generic campaign contributions.

Special interests tend to be well-organized, well-funded and able to mobilize their lobbyists and support groups into a super-coordinated effort at a moment’s notice. The can match direct contributions with contributions to parallel political action committees (PACs) and massive publicity campaigns, public demonstrations or “behind closed doors” strong arm tactics. Their agendas have slowly become the political direction of America

After all, it took Congress to deregulate credit default swaps and SEC action to allow those “too big to fail” financial institutions to remove the debt limits on their investment portfolios. Political pressure is omnipresent, a harsh fact of life. Even as our financial world began to collapse in the regulatory failures that were lobbied into ineffectiveness, cries for “ground-up” reform were heard from every quarter. After all, if the actual voting body politic were going to hold their elected representatives to task for their legislative failures, the power of the special interests was clearly suspended. But special interests knew when to back into a corner and hide; when voters’ anger and passions would subside, it would be back to “business as usual.” Nothing to worry about.

You may have noticed more polarizing politicians in elective office. More special interests pushing their agendas. Democracies don’t function well where money determines political outcomes. When the moments are right, special interests will always come back, particularly if we let them. So as you ask yourself what happened to all those promises of regulatory reform, by the tenor of this blog, I think you can figure out exactly what happened.

Look around you. Goldman Sachs, JP Morgan and host of mega-financial institutions are having record years, recording profits that exceed the pre-meltdown levels of early 2008. Bonuses at these institutions are hitting record-breaking levels. But are they investing in the future growth industries of America, helping to create the cutting edge jobs we have been promised and helping mainstream American small businesses by providing reasonable access to working capital and normal bank lending? Guess. We hear about the “jobless recovery.” We see collapses of small, medium and large businesses every day – layoffs continue unabated. Pre-meltdown focus on trading without true investing has returned with a vengeance.

So as President Obama spoke on September 14^th before the lions of Wall Street, he said: ““I want them to hear my words. We will not go back to the days of reckless behavior and unchecked excess at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses… those on Wall Street cannot resume taking risks without regard for consequences, and expect that next time, American taxpayers will be there to break their fall.” But Congress is already unraveling the most comprehensive and compelling aspects of regulatory reform.

The September 15^th New York Times points out one prevalent point of view: “‘The president has offered a reform proposal that would grant broad new authorities to government bureaucrats while intruding in private markets and restricting personal choice,’ said Spencer Bachus of Alabama, the senior Republican on the House Financial Services Committee. ‘The obvious lesson of the events of September 2008 is that we need smarter regulation, not more regulation, not more government bureaucracy, and not more incentives to engage in harmful business practices.’” But don’t mistake this for being just a “Republican” point of view. Special interests, particularly those on Wall Street, have just as many Democrats in their pockets; remember they contribute a lot, often and early in the game.

We’ve already abandoned that effort to do a ground-up reworking of our financial regulatory system. We may add a new regulator here or there, expand the power of some of the existing administrative bodies, but the mega-billion-dollar Wall Street regulars have already diluted efforts against executive pay, tighter regulation of credit default swaps, the destruction of the existing regulatory bodies in favor of an entire new set of effective structures, and are fighting requirements for keeping more equity on their balance sheets (instead of debt). Take a look at who’s making real money out there… and who’s not. You can see who’s running the show; the American people sure aren’t!

I’m Peter Dekom, and I approve this message.