Politics, et Cetera

A publication from The Political Forum, LLC

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Tuesday, October 27, 2015

They Said It:

Whoever fights monsters should see to it that in the process he does not become a monster.  And if you gaze long enough into an abyss, the abyss will gaze back into you.

Friedrich Nietzsche, Beyond Good and Evil, 1886.



The conventional wisdom on the Left and in the mainstream press is that Hillary Clinton easily “destroyed” the House Select Committee on Benghazi last week, simply by virtue of the fact that she didn’t make a complete ass of herself, or come unglued on camera, or trip over the curb as she exited her limo.  The conventional wisdom on the Right is that her appearance was far less wonderful than her fanboys (and girls) in the press would have us believe.  She may not have made any glaring errors, but she did, in fact, expose herself as a lying hack, someone concerned with appearance over policy and self-preservation over national security or honesty.

To which we would reply, “Who didn’t know?”  Or, to borrow a phrase from Miss Hillary herself, “What difference does it make?”

Of course, the Left’s answer to this question is that it matters because it demonstrated to the world that Hillary is tough enough to be Commander in Chief.  Conservatives pundits seem to think that it confirmed their belief that Hillary’s rank opportunism and manifest dishonesty will simply be too much for the voting public to tolerate and that they will, at some point, decide that they just can’t vote for a candidate so divorced from the truth and so willing to lie so unremorsefully to their faces.

Relative to this latter point, the best analogy we saw was that which compared Hillary’s testimony to that given almost three decades ago by former Marine Lt. Colonel Oliver North in the Iran-Contra probe.  Like Hillary, North “won” the confrontation with the partisan committee and emerged as a hero to his fellow partisans.  Ultimately, however, his reputation took a severe hit.  And when he tried to run for Senate, voters remembered his duplicity and his shamelessness, and chose to reelect the loathsome Chuck Robb, who had admitted to “nude massages” with a former Miss Virginia and future Playboy Playmate, rather than deal with the ethically challenged arms-for-hostages-trader.

This is a happy thought, we suppose.  But we won’t hold our breath.  As we’ve pointed out before, American voters do not seem all that concerned with character as measured by traditional Judeo-Christian standards.  Indeed, we spent much of the first half of the 1990s documenting and cataloging the dishonesty and corruption inherent in the Clinton White House, only to see Bill reelected in 1996.  And to add insult to injury, in 1998, voters gave Bill and his Democrats a surprise midterm victory, a reward for lying to them about a particularly repulsive tryst with an intern only slightly older than his daughter and for committing perjury to keep that his markedly sleazy action secret for as long as he could.

So the story is simple, right?  As the late great, New York Senator Daniel Patrick Moynihan explained some 22 years ago, American’s have defined deviancy down.  Dishonesty, sleaze, and degeneracy have become the norm.  Hell, it is no longer certain that being caught in bed with a dead girl or a live boy – to quote a famous phrase from Edwin Edwards, one of Louisiana’s most famous corrupt governor’s – would necessarily cost a Democrat an election bid.

Well, certainly that’s part of it.  But there is a great deal more to it than just that.  You see, the important story here – the one that really matters to the future of capitalism and thus to the nation’s financial health – is not that a large percentage of the voting public doesn’t care if Hillary is a “congenital liar.”  After all, the legendary William Safire used that very term to describe Hillary said some 20 years ago, and yet she is still the odds-on favorite to win the White House next fall.

No, the really important story here is that Hillary’s dishonesty is in no way a political liability.  Indeed, it is the very source of her political strength.  To put it another way, those who support her candidacy with millions of dollars of donations do so not in spite of her bald-faced dishonesty, but because of it.  To them, her corruption is her principal virtue.

How can this be so?  Of what value to the masters of the universe is a crooked politician?  Let us explain with a brief look at American history and specifically at the birth of the regulatory state.

Although he was Republican, Teddy Roosevelt was also America’s first leftist president.  That is to say that he was the first president who declared that the Constitution was out of date; that the power of the federal government needed to be expanded in order to deal with the realities of the 20th century.  He put it this way: “The old laws, and the old customs which had almost the binding force of law” are no longer sufficient “to regulate the accumulation and distribution of wealth.”

Needless to say, Roosevelt’s views on the “distribution of wealth” brought him quickly into conflict with the nation’s big businessmen.  And that mean, in turn, that Roosevelt’s meddling brought him quickly into conflict with the biggest of the big businessmen, the legendary John Pierpont “J.P.” Morgan, the nation’s most successful and powerful banker.

On February 9, 1902, Roosevelt had his Justice Department file an antitrust suit against Northern Securities Company, a railroad trust that Morgan had put together in an attempt to end a bidding war between E.H. Harriman and James J. Hill for the Chicago, Burlington & Quincy railroad.  The bidding war had precipitated a “disastrous financial panic” and was thus bad for business.  Morgan fixed the problem and was rewarded for doing so by Roosevelt’s suit.

Having just put together U.S. Steel – the largest steel company in the world, with three times the revenue of the federal government – Morgan grew worried about the “reformer” president and his intentions.  So he went to Washington, accompanied by Ohio Senator and Republican National Committee Chairman Mark Hanna and New York Senator Chauncey Depew to meet met with Roosevelt and his Attorney General Philander Knox.

The meeting was – how shall we put this? – somewhat less than cordial.  Morgan opened the conversation with the blunt and now famous statement, “If we have done anything wrong, send your man [Knox] to my man [Morgan’s lawyer Francis Stetson] and they can fix it up.”  Both Roosevelt and Knox replied: Teddy saying, “That can’t be done,” and Knox adding, “We don’t want to fix it up, we want to stop it.”

The historical consensus is that this meeting was decided decisively in Roosevelt’s favor, making him – and the federal government – a player in the world of high finance.  Or, as Morgan’s biographer, Andrew Sinclair put it in Corsair, The Life of J. Pierpont Morgan:  “He [Morgan] realized that in the President he had found an adversary more difficult than Cleveland at the end of the gold crisis.  The White House people were no longer in his pocket.  In fact, he might be in theirs.”

As you might have guessed – given our propensity for contrariness and the fact that we chose to tell this story at all – we do not agree with this historical consensus.  Indeed, we believe that Morgan won the day and won it handily.  And why not?  Roosevelt was way out of his league.  Morgan was one of the most powerful, intelligent, and influential men in the world.  He was a colossus, a force of nature.  He was an authoritarian who believed in the concentration of power.  Indeed, he very much would have preferred just one great trust ruling over all commerce.  He valued order in business, in society, and in government.  He was scrupulously honest and ethical because he believed that corruption was disorderly.  Power when used unjustly was likewise disorderly.  He had put together the Northern Securities to end the squabbling that was hindering the railroad business.  He had formed the Steel trust because competition was disorderly.  And now it had become clear that friction between the government and business was a new source of disorder.  Clearly, if Jupiter, as he was called in the press, was to rule over an orderly world, he would personally have to assure that the government of that world was orderly.  Which meant that he had would have to engineer a takeover.

In June 1902, just a few months after the aforementioned meeting with between Morgan and Roosevelt, George W. Perkins, a member of Morgan’s inner-circle who was charged with “government relations,” called on the White House to ask if he could arrange for “some safe plan for us to adopt” in combining several major American flag shipping lines with British Leyland to better compete with the other leading British line, Cunard.  Roosevelt recognized this request for what it was, i.e., a bid for détente, and he did not challenge the combination.  He thought he had Morgan right where he wanted him.

A few weeks later, Perkins received a call from Rockefeller Jr. whose brother-in-law, one of three sons who inherited McCormick Harvesting Company, wanted to buy the firm’s major competitors but had been warned that their plans could run afoul of the Roosevelt trust busters.  Perkins suggested that they should hire the House of Morgan to help with the transaction.  They did, and, of course, the merger of five of the nation’s six largest manufactures of farm equipment into a firm called International Harvester went unchallenged by Roosevelt, just as Perkins had assumed and, should we say, assured that it would.

The following September, Roosevelt gave the speech in which he explained that his future actions against the various trusts would be entirely subjective.  Or more specifically, that he himself would judge the legality of trusts not on size but on whether or not they “behave badly.”

Roosevelt’s new friends at Morgan were pleased with the idea that Teddy himself would decide which trusts were “good” and which were “bad.”  And their marriage of convenience subsequently flourished.  Among other things, they joined forces in October 1902 to end a strike by 150,000 coal miners in Eastern Pennsylvania that threatened millions of city dwellers with a winter without heat.  And sometime during the next year, Morgan became, to borrow a phrase from author Andrew Sinclair, “Roosevelt’s bagman in the taking of the Panama Canal.”

To lend some administrative legitimacy to their arrangement, Roosevelt asked Perkins in 1903 to help push a bill through the Senate that would create a Department of Commerce, which would house an industry-friendly Bureau of Corporations that would be vested with the authority to conduct investigations and provide “expert” advice to the President on the various trusts.

The rest, as they say, is history.  Morgan consolidated his position.  Roosevelt pushed rent-extracting regulations, killing competition by raising the barriers to entry in business.  And both men got exactly what they wanted . . . until Roosevelt pushed too far.

In November, 1906 – in a fit of pique over midterm elections in which Republican funds from business dried up – Roosevelt had his Justice Department sue Standard Oil.  The suit in combination with Roosevelt’s increasingly harsh anti-business rhetoric, helped precipitate the stock market crash and credit crunch the following spring, the “Panic of 1907.”

The details of the panic are, more or less, unimportant here.  What matters is that Roosevelt’s presidency was on shaky ground and was saved only by the intervention of J.P. Morgan, who not only calmed the panic, but made a killing for U.S. Steel in the process.  Morgan acquired Tennessee Coal, Iron and Railroad Company, bypassing federal antitrust risks, paying $45 million for assets valued later at nearly $1 billion, and further consolidating U.S. Steel’s position.

Big Business won.  Big Government consented.  And a beautiful partnership was born.  The arrogant and somewhat dull Teddy Roosevelt had pushed business too far and, in response, had been forced to let J.P. Morgan use the federal government to further his own ends and to expand his own power and wealth.  The regulatory state was born.  And its “cooperation” with business was formalized.  The corporatism that animates the Big Business-Big Government nexus today was cemented.

What, pray tell, does any of this have to do with Hillary Clinton, you ask?  Well, as it turns out, Hillary is our very own modern-day Teddy Roosevelt, or at least she’s the next best thing.  Hillary lacks Roosevelt’s penchant for reform and most of his wit.  But she shares his arrogance and his belief in her own indispensableness.  More to the point, Hillary’s corruption ensures that she will, like Roosevelt, accommodate Big Business, and especially the Big Banks, whenever and however she can.

Hillary Clinton has spent the better part of the last several months trying to portray herself as an average, progressive politician who wants nothing more than to help average people get ahead in life.  Indeed, that’s the foundation of her campaign.  The facts, of course, belie this trite and hackneyed notion.  Hillary has received more campaign contributions from CEOs this election cycle than any other candidate, more than the top 3 Republicans combined.  She is the favorite of donors who work for law firms, tech companies, and, naturally, big Wall Street banks.  In the current cycle, Clinton’s top donors include Morgan Stanley, JPMorgan Chase (SHOCK!), and the Blackstone Group.  Over the course of her political career her top corporate donors include Citigroup (#1), Goldman Sachs (#2), JPMorgan (#4), Morgan Stanley (#5), Lehman Brothers (BOO!, #12), and Credit Suisse (#20).  She is the candidate of the big banks, and she is so for a reason.

Now, the New York Times columnist and onetime winner of the Nobel Prize in economics, Paul Krugman, would like everyone to believe that Wall Street money has returned to its traditional home.  Whereas the Big Banks once supported Democrats like Bill Clinton and Barack Obama, the money this election cycle is all flowing back to the GOP.  As Krugman put it in his October 16 column:

If Wall Street’s attitude and its political giving are any indication, financiers themselves believe that any Democrat, Mrs. Clinton very much included, would be serious about policing their industry’s excesses.  And that’s why they’re doing all they can to elect a Republican. . . .

The financiers didn’t feel grateful for getting off so lightly.  On the contrary, they were and remain consumed with “Obama rage.”

Partly this reflects hurt feelings.  By any normal standard, President Obama has been remarkably restrained in his criticisms of Wall Street.  But with great wealth comes great pettiness: These are men accustomed to obsequious deference, and they took even mild comments about bad behavior by some of their number as an unforgivable insult.

If you take Krugman at his word, this is both a dramatic and a telling shift.  But then, if you take Krugman at his word, you’re a fool.  What Krugman doesn’t mention is that ALL of the numbers he cites – all of the money he notes has shifted away from Democrats and to Republicans – involves hedge funds exclusively.  Hedge funds and their managers have indeed shifted their donations back to Republicans, after two election cycles supporting Obama.  But hedge funds are, we don’t need to tell you, a relatively small part of the business.  What Krugman is either too dim to understand, or hopes that his readers are, is the fact that this shift on the part of hedge funds makes perfect sense, given the Roosevelt-Morgan precedent and the “promise” of Hillary Clinton.  Krugman gives the game away in the same column:

Furthermore, while the Dodd-Frank financial regulation bill enacted in 2010 was much weaker than many reformers had wanted, it was far from toothless.  The Consumer Financial Protection Bureau has proved highly effective, and the “too big to fail” subsidy appears to have mostly gone away.  That is, big financial institutions that would probably be bailed out in a future crisis no longer seem to be able to raise funds more cheaply than smaller players, perhaps because “systemically important” institutions are now subject to extra regulations, including the requirement that they set aside more capital.

Ah yes, Dodd-Frank, which is precisely the kind of bill that Roosevelt would have loved and which he would have been able to pass with aide of J.P. Morgan and his emissaries.  And it is no coincidence that the Big Banks have spent a great deal of time and money “helping” regulators write the law’s massive set of regulations over the last five years.  As the editorial board of the Washington Examiner noted on Dodd-Frank’s fifth anniversary, the law was, is, and will continue to be a huge victory for the Big Banks.  To wit:

The Dodd-Frank bill contained 360,000 words, about twice as many as the New Testament, but the regulations written to implement it are far more voluminous.  Some are still being drafted, but already Dodd-Frank has created more regulatory requirements and prohibitions (nearly 28,000) than all other Obama-era laws combined, according to new analysis by Patrick McLaughlin and Oliver Sherouse of the Mercatus Center at George Mason University. . . .

All this government-mandated busywork has helped the industry’s largest players, the too-big-to-fail banks that caused many of the problems, run roughshod over their smaller competitors.

“More intense regulatory and technology requirements have raised the barriers to entry higher than at any other time in modern history,” Goldman Sachs CEO Lloyd Blankfein said just this February.  “This is an expensive business to be in, if you don’t have the market share in scale.  Consider the numerous business exits that have been announced by our peers as they reassessed their competitive positioning and relative returns.”

A February 2015 working paper by Marshall Lux and Robert Greene at Harvard’s Kennedy School found that “while community banks weathered the crisis with greater resilience than many mid-size counterparts, since the passage of the Dodd-Frank Act the pace at which community banks have lost market share is nearly double what it was during the crisis.”

In other words, community banks were more prudent and thus did better in the financial crisis, yet they have been getting killed ever since by the regulatory response that Dodd helped usher in.  From this, one might almost get the impression that Dodd-Frank rewarded big banks for their bad behavior. . . .

The big bankers got what they wanted.  Americans got a financial crisis.  And then the big bankers got what they wanted again.  That’s the what Dodd-Frank wrought.

Hillary, of course, is a big fan of Dodd-Frank.  And the Big Bankers are, therefore, big fans of Hillary.  As for the hedge fund guys – you know, the upstarts and the entrepreneurs who are competing against the entrenched interests and hoping to keep further regulation from raising additional barriers designed to keep them from making money for themselves AND their clients – they see a threat in Hillary.  And is it any wonder?

For the fact of the matter is that government regulation has never been an impartial effort undertaken in pursuit of the “public good,” as its proponent’s claim.  Rather, regulation has always been a prejudiced effort in support of one private interest over another, as Fred S. McChesney, an economist and law professor, amply demonstrated in his classic tome on the subject of governmental rent-extraction, Money for Nothing: Politicians, Rent Extraction, and Political Extortion.  And, as he noted in another of his books, The Causes and Consequences of Antitrust: The Public-Choice Perspective, this was just as true in Teddy Roosevelt’s days as it is today.  Writing about Roosevelt’s effort to promote “justice” by regulating rail rates, McChesney put it this way:

Rural cattlemen and butchers were especially eager to have statutes enacted that would thwart competition from the newly centralized meat processing facilities in Chicago.  The evidence on price and output in these industries, moreover, does not support the conjecture that these industries suffered from a monopoly in the late nineteenth century, if monopoly is understood in the conventional neoclassical way as an organization of industry which tends to restrict output and raise prices.  These industries were fiercely competitive because of relatively free entry and rapid technological advances such as refrigeration.

So the long and short of it is that Hillary Clinton is a liar.  And as far as the Big Banks are concerned, that’s a good thing.  For the right price, she will look after their interests; she will make sure that regulation continues to favor the Bigs over the Littles, to the benefit of both government and Big Business.  The losers, of course, will be the people, the little people she professes to want to protect, as well as capitalism and the free enterprise system.  For corruption is inefficient.  As is socialism.

And what about Morgan, the great capitalist?  Well, in The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance, Ron Chernow notes that the above cited Perkins “drew a parallel Pierpont wouldn’t admit to,” which he described as follows:

. . . . that trusts, with their centralized production and distribution, were a form of private socialism.  And unlike Pierpont, he saw that they acquired a public character, and he favored government licensing of interstate companies and extended work benefits, including profit sharing, social insurance and old-age pensions.  This he boasted would be “socialism of the highest, best and most ideal sort.”  Although Teddy Roosevelt sometimes wondered whether Perkins simply rationalized a selfish Morgan agenda, there was a striking likeness between their views.

That a Morgan partner should advocate socialism is not so startling.  After all, Pierpont, starting with his railway associations of the late 1880s, espoused industrial cooperation instead of competition.  He liked his capitalism neat, tidy, and under bankers’ control.  The House of Morgan was banker to established enterprises — the great industrial planning system that favored stability over innovation, predictability over experimentation, and were threatened by upstart companies; so the bank had a heavy stake in the status quo.

In closing, we would note that anyone who has paid even the slightest bit of attention to American politics over the last quarter century knows that Bill and Hillary Clinton are unlike any couple in the history of the nation.  They are not only unique in their joint ambition, they are unique in their joint corruption.  Although we didn’t say so expressly, our piece last week explained why so many businesses and so many “average” Americans support Hillary Clinton.  They know that there is a war extant in the land over a diminishing amount of government funds dedicated to a rapidly expanding demand for these funds.  In fact, it is no exaggeration to say that the comfortable world that these Americans have built over the past century is at stake.  And, whether they will admit it or not, the central bankers of the world know this too, which is why they are desperately printing money to keep the Ponzi scheme alive.

And when the stakes are this high there is no room for luxuries like “honesty,” and “character.”  Indeed, the more corrupt the better – as long as the candidate in question is on their side.

Hillary Clinton is a liar?  You bet.  And her testimony last week confirmed this, to the delight of her supporters, who not only do not care about her e-mail cover up, but view her efforts on this front as corroboration of her willingness to go to great lengths for the good of the team.  Indeed, not only does her duplicity confirm for them her worth as a political player, it also distracts from the real Clinton scandal, that being that there is stunning overlap between those in Big Business who support Hillary Clinton’s presidential campaign and those who have made her and Bill multi-millionaires through the Clinton Foundation.

Consider the following “hypothetical”:  Let’s say you happen to work for a Swiss banking giant and that this banking giant’s name is, say, UBS.  And let’s just say that your bank happens to have some problems with the IRS and its newfound dedication to ending banking secrecy.  What do you do?  Well, if you’re smart, you summon the Secretary of State to Geneva and implore her to work things out.  And when she does work things out, you decide – out of the goodness of your heart – to increase your donations to her “charitable” foundation tenfold; and you also loan said foundation some $32 million for an inner-city entrepreneurship program; and you also hire her husband to do a little Q&A and pay him $1.5 million for his trouble.  Tit for tat, as they say.  What could possibly be better?

Well . . . instead of being Secretary of State, that woman could the President.  Now, THAT would be better!

And don’t think for a second that the folks at UBS are the only ones who know it.  After last week, everyone knows it – or everyone has been reminded of it once again.  And that just makes her all the more attractive.


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