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Congress's bipartisan regard for Wall Street money


John Paulson, the hedge-fund manager at the center of the Goldman fraud case, is a model of bipartisanship. Not too long ago, he organized a fundraiser for the Republican National Committee. Then he organized one for Sen. Chuck Schumer, the Democrat who's probably most involved in planning and funding the party's senatorial races. "John Paulson supports a variety of candidates in both political parties," explained a spokesman.

But to paraphrase "The Incredibles," saying you support everyone is the same as saying you support no one. This is where our campaign finance system gets so undeniably corrupt: Paulson doesn't simultaneously believe in Chuck Schumer and the RNC. There'd have to be something wrong with you to be an enthusiastic partisan of the Fantastic Four and Dr. Doom (I'm not saying who is who in this analogy) simultaneously.

Rather, Paulson is doing something he's pretty familiar with: hedging. And the investment he's hedging isn't his political support for these actors. It's his access to them. It just wouldn't do for one party to win and freeze him out.

It's bad enough that our campaign finance system makes the rich more important constituents than, well, everyone else. But that's actually the least of its problems. More infuriating is that they system is used qualitatively differently by the rich than by the poor. It would be one thing if the situation was simply that the rich had more money to donate to the candidates that ignited their passion. But in reality, the motivations of a child-care worker who sends $100 to Barack Obama or Ron Paul and a hedge fund manager who holds fundraisers for both the RNC and Chuck Schumer could not be more different. One is supporting a candidate. The other is investing in access to candidates.

We have, in essence, a two-tiered campaign finance system. And the politicians who benefit from it are no more eager to explain who helped structure their thinking than Goldman Sachs is to explain who helped structure its CDOs.

Graph credit: Wall Street Journal.

By Ezra Klein  |  April 21, 2010; 9:00 AM ET
Categories:  Congress , Financial Regulation , Government  
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Expect any changes to be purely cosmetic. Or, small concessions made by Wall Street on things they don't see as impeding their power, or their ability to make gobs of money.

Posted by: Kevin_Willis | April 21, 2010 9:39 AM | Report abuse

so are we going to see a rush to have the RNC or Schumer give the money back?

And its not just Wall Street that does this and Ezra knows this. All lobbyists spread their money around. In fact I'd bet you could statistically look at it and find a correlation to the "up and coming party" and which gets MORE money than the other from lobbyists. In 2006-2010 the Dems prior to that the Republicans and on back through the graph above to the time of Clinton. Thus you could fairly predict whose going to be making the rules (ie the majority)

Posted by: visionbrkr | April 21, 2010 9:43 AM | Report abuse

It always amuses me when politicians say that it's not a bribe. If I give candidate X $200 and a hedge fund manager raises $100,000 for candidate X whose phone call will be returned. As an educated 21st century man I can't believe there is no quid pro quo. They really do believe we're stupid.

Posted by: dpcret93 | April 21, 2010 9:47 AM | Report abuse

When the bars for each party's "take" year are placed beside one another, rather than stacked, the blue bars look considerably taller than the red bars (except for 1996).

If the Democratic Party really is receiving that much more money from Wall St, couldn't it (and shouldn't it) simply refuse some of the donations to help level the playing field?

It is concerning that a party which has willingly accepted so much funding now has the task of regulating its benefactors: how willing will the party be to regulate its benefactors -- reducing benefits to the party -- and thereby do through statute what it has refused to do of its own accord?

Posted by: rmgregory | April 21, 2010 9:51 AM | Report abuse

Welcome to the plutocracy brought to you by the oligarchy. Playing both sides of the aisle just makes the cost of the bidding for your typical congresscritter too high for 99% of Americans.

Posted by: srw3 | April 21, 2010 9:52 AM | Report abuse

I'm guessing that even under the Fair Elections Act, special interests would still sponsor fundraisers, although the individual donors would be smaller.

Posted by: jduptonma | April 21, 2010 9:57 AM | Report abuse

"There'd have to be something wrong with you to be an enthusiastic partisan of the Fantastic Four and Dr. Doom (I'm not saying who is who in this analogy) simultaneously."

Ah, but lovers of Marvel comics purchase comic books featuring both characters, and love those stories equally. John Paulson is just showing his support for the political process, and clearly believes that a healthy, vigorous debate is what creates the best policy. He loves Democracy, and the debate in the market place of ideas. That's what he's donating to!

You're so cynical, Ezra.

Posted by: Kevin_Willis | April 21, 2010 10:03 AM | Report abuse

Whoa? Really? Wecome to America Ezra, took you how long to figure this out?

Posted by: jercary | April 21, 2010 10:10 AM | Report abuse


Loved that last sentence! Beautiful turn of phrase.

Posted by: keilprti1 | April 21, 2010 10:17 AM | Report abuse

As befits the times, the election process has become increasingly derivative - one that primarily benefits politicians and special interests. The important question is "cui plagalis? Who loses? And the resounding answer is: the rest of us.

Posted by: pneogy | April 21, 2010 10:18 AM | Report abuse

I'll make it a formal challenge: let the party who has received the most donations from Wall Street make a contribution to the other party (or to charity) so that the playing field is level. Why wait for a new statute to regulate giving? Right now -- in the moments before voting on Wall Street regulations -- let the donation-receivers prove that they can manage themselves.

Posted by: rmgregory | April 21, 2010 10:22 AM | Report abuse

And on certain issues, you can see how this access pays off.

On Wall Street reform, we have one party that wants to issue a handful of regulations that address the proximate causes of our current meltdown, and another party that wants first and foremost to improve their own electoral prospects by making the leadership party look incompetent, and has a secondary goal of weakening that small handful of regulations.

There is no party pushing any proposals to address the systemic and long-term causes of our epic financial collapse. There isn't even a rhetorical challenge being mounted to the notion that Wall Street is an efficient allocator of capital.

This is what Wall Street cash bought. A bipartisan consensus to accept that the financial services sector has DOUBLED in size since th 1980s. A bipartisan consensus that 8% of our economy in financial services isn't a problem, and that if it continues to grow, that's fine, too. That's the macroeconomic consensus.

It's incredibly dangerous, but it's what keeps the banksters rich, so it's what they're buying from DC.

Posted by: theorajones1 | April 21, 2010 10:27 AM | Report abuse

Invest in America: BUY A CONGRESSMAN!

Posted by: nisleib | April 21, 2010 10:27 AM | Report abuse

Visionbrkr: Giving the money back? Hillary got $400k from Goldman Sachs, and Obama got a million . . . and that's just from GS.

Even if they do give it back, they'll just find it under another rock in the park a week later. There's no wave of a magic wand that is suddenly going to turn all our DC politicians into citizen farmers.

Posted by: Kevin_Willis | April 21, 2010 10:41 AM | Report abuse

I hope those who complain about corporate campaign contributions support public campaign financing. Campaigns cost money, and it can be Goldman's money or our money. No one's money is not an option.

I know which option I prefer.

Posted by: dasimon | April 21, 2010 11:19 AM | Report abuse

Kevin, and yet the Mole Man has never been able to carry his own book. It's the system!

Posted by: MosBen | April 21, 2010 11:28 AM | Report abuse

"our campaign finance system makes the rich more important constituents than, well, everyone else"

This is the crux of the problem with the Citizens United ruling: It diminishes the speech rights of poor people.

Posted by: jeirvine | April 21, 2010 11:47 AM | Report abuse

In fact our system of government makes politicians pander to the little guy. The little guy casts most of the votes. They are free to and often do vote for the person whose ethnic identity or race they like. They are also free to and often do vote for those who serve their private short term economic interests regardless of the fairness or long term consequences of those interests. Our economy is built on the premise that economic power flows to those who are most effective in using it. The little guy depends on that effectiveness. That is why you see politicians like Ted Kennedy and John Kerry voting against their political philosophy when issues come up that impact the economic interests that employ their constituents. It is hard to see a negative in the practice of major economic interests contributing to both parties. The wider the net of contributors the more likely that everyone's speech will be heard and the less dependent the candidate is on any particular one. For all the noise that is made about money in politics, there is little evidence that wealthy special interests have determined the major direction of recent American politics. Politicians are far more worried about the perceived special interests of those who actually get to cast most of the votes.

Posted by: dnjake | April 21, 2010 1:03 PM | Report abuse

Mr. Klein,
Your assessment about the "integrity" of both parties of the government is right on target. That is the reason for me choosing to become an independent voter. I DISTRUST most of the government officials because they act and legislate based on what is the political whim of the moment or to manipulate the current anger of the voters.

For example, the GOP a few weeks ago before the GS lawsuit, was on the bandwagon of declaring the the Dems are overspending and intent on growing the size of the government. So now what are the GOP doing? Supporting the financial regulation refom that has as its main goal of CREATING another HUGE AGENCY within the FED to oversee and control the financial market.? This support totally contradicts their mantra of lower spending and smaller government. We ALREADY have a SEC and the FTC to protect consumers rights. We do NOT NEED a Consumer Financial Trading Protection agency to ADD another layer of bureucracy having to coordinate with the SEC & the FTC!
If we were to use the analogy of a corporation facing financial difficulties, WHAT IS THE FIRST THING THEY DO? They cut and streamline their operations - they layoff people and make their remaining departments more productive and efficient. THAT is the model that the government SHOULD follow rather than to continue to grow MORE bureucracy and MORE layer on top of inefficiency. DOES THAT MAKE SENSE TO YOU?

Posted by: american17 | April 21, 2010 1:19 PM | Report abuse

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