Moyers, David Corn, and Kevin Drum discuss money in politics

Invisible Fan · Feb 11, 2010

I missed this in January, and this was aired before the Supreme Court campaign finance ruling.

It goes beyond regulatory capture, where, say the banks control the S.E.C. That's one thing. Intellectual Capture means that essentially the financial industry has convinced us, you know, in the '50s what was good for General Motors was good for America. Now it's what's good for Wall Street is good for America. And they've somehow convinced us that we shouldn't ask about what's right or what works or what's good for America. We should ask what's productive, what's efficient, what helps grow the economy.

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Transcript

Exerpts:

KEVIN DRUM: Well, it doesn't say anything good. And derivatives are a good example of how this stuff works. I mean, take a look at what happened. Derivatives were at the center of the financial meltdown in 2008. And at first everybody was all ready to regulate derivatives. And the big idea was to put them on an exchange, like a stock exchange, where they're all traded publicly and transparently. What happened was there were corporations — you know, if you're an airline, and you're worried about the price of jet fuel, you might want to buy a hedge. Hedge the price of jet fuel. And so, the airlines and some other companies went to Congress and said, look, those are derivatives, but they shouldn't be traded on the exchange, because that's not the financial stuff that blew up the world. No problem. Everybody pretty much agreed they ought to be exempted from that. But then it's all in how you write the rules. So, the rules got written. And as they slowly got changed, it turns out you've got to define who is an end user. Who is a corporation, as opposed to a bank? And the rules got written and they got written a little more broadly and a little more broadly until eventually if you read the rules right, it looked as though pretty much anybody was an end user. Goldman Sachs would end up being an end user. And 80 percent of the derivatives would have been exempt.

BILL MOYERS: And what does that say to us?

KEVIN DRUM: It says that the banks are in charge. And they're in charge, they get people, you know, right now, banks are in, you know, nobody wants to be around Goldman Sachs, right? So, what they do is what you were talking about. They get the car dealers and they get the local banks and the credit unions and so forth to basically front for them. And these corporations go in and they say, "We want an end user exception." And they get it. And then all it takes is a few congressional aides here and there to change the wording a little bit--
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KEVIN DRUM: That's right. And I think what happened was the Obama Administration saw what happened with a bill that they thought would pass easily, and they realized what they were up against. And so, even their original proposals, I think they were watered down even before they went to Congress. And then once they're in Congress, they get watered down some more. And once it gets to the Senate, it's going to get watered down even more.
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BILL MOYERS: Look at this. This is a list of all the contributions over the last 20 years to Members of finance-related Congressional Committees. Let's just take the first eight. Out of the first eight, six of them are Democrats. And those six Democrats have received from the financial industry some $68 million. What does it mean to take that much money? And it's Democrats at the top of this.

KEVIN DRUM: It's Democrats and Republicans. But, yes. Look, there's no way you can take that money. I mean, if you talk to Chuck Schumer, you talk to Barney Frank, you talk to these guys. They'll tell you that they take the money, but then they're going to do the right thing anyway. Well, that's just not possible. You know, Chuck Schumer to take an example, he raised so much money up through I think 2004-2005. He actually stopped taking personal contributions.

He had so much money, he stopped taking contributions and headed up the Democratic fundraising Senate Committee. The overall Senate Fundraising Committee. Raised a couple hundred million dollars, a lot of it from the financial industry. And that went to all Democrats. Not just Schumer. It went to all Democrats who were running for the Senate. Well, there's no way you can take that money and not at least be leaning in their direction, one way or another.

BILL MOYERS: Well, let's one example that you report in your story in "Mother Jones." This is the carried interest rule. The one that declares that compensation from capital gains will be treated as ordinary income. So that the tax rate for hedge fund managers will be 15 percent instead of 35 percent.

They're paying a lower tax rate than secretaries, janitors, nurses, school teachers, members of our team here. What happened when reformers tried to eliminate that loophole?

KEVIN DRUM: If you're running a hedge fund, you are using other people's money and investing it. Now, by any ordinary definition, that's just ordinary income. If I make ten percent or 20 percent, I'm paid basically a commission, that's ordinary income. But the law right now says it's capital gains.

There no excuse for that. There's no excuse for it to be taxed at the lower capital gains rate. It should be taxed at the higher rate. In 2007, after Democrats took over Congress, there was a movement to change that. To tax it as ordinary income, which is how it should be taxed.

And what happened was that the hedge funds who had not really had a big lobbying presence on the Hill before. Because they weren't regulated, so they didn't really need to. They suddenly got religion. And the private equity contributions to Members of Congress suddenly skyrocketed. And eventually Chuck Schumer decided that he would only support a change to the law if it also affected some other industries. And that was just enough to get opposition from other quarters and the bill failed.

DAVID CORN: He basically found a poison pill way to kill it. And Chuck Schumer could say, "Hey, you know, this is a New York issue. Hedge funds are based in New York."
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Moyers, David Corn, and Kevin Drum discuss money in politics

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