Today marks the tenth anniversary of President Clinton's signing of the Commodity Futures Modernization Act (CFMA). At passage, the bill was said to establish "legal certainty" for derivatives. In other words, the bill assured bankers that they wouldn't face any legal consequences in the United States when they manipulated, defrauded, and colluded their way to billions in profits using financial derivatives that no one understood. The CFMA led to serious consequences for the rest of us, including the exacerbation of the housing bubble and the subsequent bank bailouts and foreclosure crisis; the California electricity crisis; periodic food and energy price spikes that have hit consumer pocketbooks hard; and, of course, the continued reign of an unaccountable shadow banking sector over the economy. The legislation was a bipartisan effort, but Clinton Treasury Secretary Larry Summers -- who will soon be leaving the Obama White House -- deserves the bulk of the credit for its passage. Summers, along with Robert Rubin and Alan Greenspan, had prevailed over CFTC chair Brooksley Born two years earlier when she attempted to subject derivatives to regulatory oversight. Born was essentially forced out by Summers & co, who then went to work putting together the deregulatory gift basket that later became known as the CFMA. Summers worked Congress in the year preceding the bill's passage, and testified in June 2000 that it was his "very great hope" that the bill should pass. Democrats have blamed Republican Senator Phil Gramm for one of the more controversial measures in the bill, the so-called "Enron loophole," which has enabled destructive energy speculation of the sort that caused California's electricity crisis and the fuel price spikes of 2008. The story goes that Gramm used some kind of extraordinary legislative maneuver to slip the loophole into the bill at the last minute, unbeknownst to other Senators or the Clinton Treasury. During the 2008 presidential race, the Obama campaign suggested that Gramm, a McCain adviser, was the creator of the loophole. Journalists ran with that story. This version of events is extremely far-fetched. Summers and his lieutenants deserve just as much of the credit, if not more, for the inclusion of Enron's language in the final bill. As early as August 2000 -- four months before the passage of the CFMA -- Summers lieutenant Lee Sachs, who handled energy negotiations for Summers, indicated to Enron lobbyists that Treasury would support the Enron language, which appeared in the House bill (but not the Senate bill). Here is Enron lobbyist Chris Long describing the meeting to higher-ups in an email from the Enron archive:
I told Lee that we shared his desire to move the legislation as long as it contains a full exclusion for all non-agriculture commodities (including metals). He said that we would have a difficult time defending the metals provision politically. But, Lee said "we would not find Treasury opposition to the House Commerce Committee language" (which includes favourable language on energy and metals). This is a positive development, because it isolates the CFTC from its key defenders and I hope ensures no veto threat on our issues. However, I do not expect Treasury to be vocal in support of our position.
Enron spent much of the next several months strategizing to get Gramm -- whose wife sat on Enron's board -- to recognize how important the legislation was to Enron, support it, and ensure its passage. Gramm was opposed to the bill on the grounds that it didn't go far enough to deregulate banking products unrelated to Enron's business. The Clinton administration's support was never in question. The plan, all along, was to go with Enron's language despite some opposition in the Senate. It helped that the Clinton Treasury was very cozy with Enron. Just four days before Congress passed the CFMA, Summers awarded Enron lobbyist Linda Robertson -- formerly an assistant secretary in the Summers Treasury -- Treasury's highest honor, the Alexander Hamilton award. Summers had recommended Robertson, who now works at the Federal Reserve, for the lobbyist job at Enron. Enron CEO Ken Lay later offered Summers a seat on the board of Enron, as he had done with the previous Treasury Secretary, Robert Rubin, at the close of the Clinton administration; Summers turned it down in light of his appointment as president of Harvard. Summers had also famously assured Lay that "I'll keep my eye on power deregulation and energy market infrastructure issues" shortly after becoming Treasury Secretary, in hand-written scrawl at the bottom of a letter. Enron lobbyist Robertson later recommended Lee Sachs -- who served in the Geithner Treasury from 2009 to 2010 -- for a spot on Enron's advisory committee in an email to Lay assistant Steve Kean and lobbyist Richard Shapiro. The email is worth printing in full (she also mentions the Summers board appointment at the beginning):
As you know, Ken has talked to Larry Summers about serving on Enron's Board of Directors. Larry told Ken that in light of his selection to head Harvard, he wants to hold off going on any corporate boards for now. My understanding is that Larry will most likely accept Ken's offer at the end of the year. In the meantime, let me suggest a candidate for Enron's Advisory Committee. Lee Sachs was Assistant Secretary of Treasury for Financial Markets under Bob Rubin and Larry. Lee coordinated the energy negotiations for Larry at the end of the Clinton Administration. You probably met Lee at those meetings. Lee is brilliant. He was a Managing Director at Bear Sterns before joining the Treasury team. He is a huge fan of Enron and is constantly telling me how extremely well positioned Enron is for the future. He has done considerable research on our business model and is constantly talking to his buddies on Wall Street about us. Lee will undoubtedly be a significant player in any future Democratic Administration. I know he would be an invaluable addition to this Committee. He has not decided what he is going to do next, but has several extremely good offers on the table from large investment firms and hedge funds. None of these would conflict with this type of activity. I thought I would plant this suggestion with you not knowing exactly how these things are done. [emphasis mine]
Sachs went on to put his corrupt buffoonery talents to work for Perseus LLC, a private equity firm run by top Democratic insiders Jim Johnson, Richard Holbrooke, and Frank Pearl. He later joined the hedge fund Mariner Investment Group, where he sold toxic CDOs to investors. In 2009 he became Geithner's right-hand man at Treasury, but left in March 2010 in the wake of controversy surrounding those CDOs, and landed on his feet at Brookings. When he leaves the Obama administration, Summers will inevitably slip out the revolving door and land some lucrative consulting contracts with investment firms that he helped bail out. The deep corporate consensus in this age of deep corporate capture will be the same as it was when Summers last exited a presidential administration -- that he did a heckuva job, in Obama's words. The markets are modernized! the bailouts are booking profits! -- and other such nonsense. It's enough to make one hope for another data dump in the style of the Enron email archive, one that would contain insider communications between bank executives and government officials, thereby further illuminating the wholly captured and compromised state of our political system, where individuals like Larry Summers and Lee Sachs are ascendant, and corporations are able to secure legislation like the CFMA on the strength of powerful friends and bottomless pockets. One can hope... *** I'd like to share one last email from the archive, in case you were still on the fence about whether the Summers Treasury was completely captured by Enron. The following email, from Enron lobbyist Linda Robertson to her higher-ups in the summer of 2001, recounts a conversation between Lee Sachs and NYT reporter Jeff Gerth in which Sachs defends Enron's favored regulatory exemptions and answers questions related to Enron's influence of the bill:
Lee Sachs was contacted for a second interview by Girth [sic]. Lee concluded from this interview that Girth is going down the "Enron influence" path. Girth did not probe the question of whether derivatives drive the physical commodity market, which as noted below was a big part of the first interview. Girth asked Lee extensive questions about Enron's involvement in the legislation and who talked to whom and when. Girth said that he had talked to the CFTC who said they got steamrolled on the energy exemption by the Hill. Lee reminded Girth how the CFTC got themselves into this bind when they first issued the "Concept Release" paper, which the President's working group immediately denounced. Lee said that the Working Group constantly told the CFTC that they should work out the issue with the Hill and to do so quickly because the CFTC had made a massive mistake with the Concept Release document. Lee reminded Girth that while the Working group did not get into the specifics of the energy exemption, that in fact energy was already exempted prior to reauthorization and that it continued to meet the criteria laid out in the President's report. I can go into that part of the discussion more thoroughly, but just suffice it to say Lee meticulously walked Girth through the safe harbor test and the background of the issue. Girth asked Lee if I had talked to Lee about the issue after leaving Treasury, to which Lee said we talked but not about this subject and that he instead talked to Chris Long. Girth asked if Ken Lay had talked to either Summers or Phil Gramm. Lee said he did not think Ken talked to Summers about the CFTC reauthorization (but mentioned Ken's very constructive engagement on the Calif energy talks) and that as far as Ken talking to Gramm, Lee had no idea but assumed two Republican Texans would have lots of reasons to talk to each other. Girth told Lee he would soon go on vacation and that they story would come after Labor Day.
Originally posted at
Tom Carper has proposed an amendment to the financial reform bill that would severely weaken consumer protections to the point where it is understood to be one of the more destructive changes to the bill. Yesterday, Zach Carter wrote an excellent piece analyzing its potential consequences for financial reform:
There are two consumer protection amendments getting serious attention on the Senate floor this week, one of them positive, one of them incredibly destructive. Both revolve around the concept of “preemption”—the ability of federal regulators to block states from enforcing laws aginst banks that operate within their borders. Over the past decade, state regulators tried to crack down on subprime outrages, but federal regulators stepped in to protect the megabanks. If we want to establish a fair financial system, we have to empower states to take action against abusive banks. That’s what makes a new amendment from Sen. Tom Carper, D-Del., so dangerous.
At OpenLeft, Chris Bowers has called the amendment "the most dangerous to Wall Street reform." Yesterday, I noted that the data we compiled for Big Bank Takeover helps shed light on Carper's motivation: the same lobbying firm that pushed for similar changes to the House bill is home to Carper's former chief of staff, Jonathon Jones. When Rep. Melissa Bean stripped consumer protections out of the House bill, she appears to have been acting at the behest of her ex-chief of staff, John Michael Gonzalez, who now lobbies for the firm Peck, Madigan. Gonzalez had lobbied on behalf of the Chamber of Commerce around the "Bean preemption amendment." The Chamber, of course, is acting on behalf of big banks. JPMorgan Chase, for instance, has worked closely with the Chamber of Commerce on financial reform issues for the past several years. The bank is a top career donor to both Carper (#2) and Bean (#4). It isn't alone among big banks in giving big to Carper; Bank of America (MBNA) is number one, and Citigroup is number three. After Bean spoke at a JPMorgan board meeting last June, executives there showered her with cash. These are the sorts of relationships that position Bean and Carper as the big banks' chosen representatives in Congress, and they're the sort of relationships which position them to lead the fight against the banks. The extent to which Carper's actions in the Senate are dictated by Jones (and the big business interests he lobbies for) has been especially evident in recent weeks. The Hill reported last week that Carper wanted to "strike legislation in the Wall Street overhaul bill designed to give shareholders greater power to name corporate board of directors." The article quotes Business Roundtable president John Castellani saying that his group would oppose the bill if the provision were included, because it "allows small shareholders with an agenda to disrupt the governance process." (The quote also sums up the problems Big Business has with democracy itself: too much power for the little guy). The Business Roundtable, of course, is a client of Carper's eternal chief of staff. Here's what he lobbied around in the first quarter of 2010 (according to disclosure filings):
Issues relating to executive compensation, shareholder votes and proxy access. S. 1074, The Shareholder Bill of Rights Act of 2009; H.R. 2861, The Shareholder Empowerment Act of 2009. Legislation and regulation pertaining to derivatives. S. 1691, The Comprehensive Derivatives Regulation Act of 2009; H.R. 3269, Corporate and Financial Institution Compensation Fairness Act of 2009. (emphasis mine)
Jones appears to have Carper's ear like no one else in Washington. Here Carper is in Politico, gushing about his former aide:
The senator seemed to relish the chance to talk about Jones, calling a reporter back between votes in the cloakroom to gush over his longtime aide. "Jonathon is the most unrelentingly positive person I've worked with," Carper said. "The glass can be bone dry, and he sees it as half full."
(Of course, doing political dirty work for big business usually pays well enough to keep the glass more than half full.) While Jones himself isn't lobbying for the Chamber of Commerce, fellow lobbyists at Peck Madigan are lobbying on behalf of the Chamber around financial reform, including Bean's ex-chief of staff, Gonzalez. Gonzalez is also working with Jones to lobby for the Business Roundtable. What's disturbing about Jones and the rest of the staffers on our list of 240 revolving door lobbyists is that while they were working inside the federal government, they were likely preparing themselves to work on behalf of big business interests in the future. Why take a bribe while still serving in government when you can leave your job after two years and make five times as much working for big banks? Here is Jones preparing for his role as a corporate lobbyist (also from Politico):
In 2003, Jones played an instrumental role in organizing a regular meeting of Democratic lobbyists and Senate staffers. Every other Monday during the congressional session, 80 to 100 lobbyists and top staffers for Democratic members plotted strategy in a conference room at the Hall of the States near the Capitol.
The inside-outside government dichotomy breaks down when you consider how these kinds of backroom meetings between lobbyists and staffers actually drive our politics. That's why events like the Showdown on K Street are so critically important. These lobbyists deserve much more scrutiny for the work they do to corrupt our democratic process as Washington insiders, and next week, they're going to get it. Originally posted at
In 2008, economist Nouriel Roubini popularized the term "shadow banking system" to describe the non-bank financial institutions that eventually helped spur the collapse of the financial system: highly-leveraged hedge funds, investment banks, and the like. This shadow system fueled Wall Street profits for years before eventually necessitating massive bailouts of the financial sector. These days, a "shadow bank lobby," has played a prominent role in shaping the financial reform process, pushing amendments that will weaken consumer protections, water down regulation of the Wall Street casino, and increase the likelihood of continuing fraud and future bailouts. I discuss this "shadow bank lobby" in Big Bank Takeover, the report on the big banks' army of lobbyists released yesterday by the Campaign for America's Future. Just as the shadow banking system threatens the integrity of financial markets, the shadow bank lobby threatens the integrity of the financial reform process). Both are designed to help Wall Street avoid oversight and accountability for its actions. Two of the principal players in the shadow bank lobby are large business associations: the US Chamber of Commerce and the Business Roundtable. As Big Bank Takeover details, each institution has morphed into an aggressive financial industry lobby over the bailout period of the past two years. During the bailout period of the past two years, as Wall Street influence has come to be seen as toxic, big banks appear to have directed significant portions of their political budget to these institutions, rather than hiring more lobbyists to lobby directly on their behalf. Last year, the Chamber, the Business Roundtable, and several other groups partnered to set up the Coalition for Derivatives End Users. The group is supposed to be representing businesses that use derivatives to hedge against risk. But yesterday, a hedge fund manager working with Americans for Financial Reform called on businesses to leave the "sham coalition," which he said was a creation of the big banks:
“Today, there is no legitimate reason that non-financial businesses should be lobbying to weaken legislation that would prevent the next AIG collapse and taxpayer bailout,” said hedge fund manager Michael Masters. “The only explanation is that these companies are being duped by the big banks, who are desperate to escape accountability for the reckless gambling that crashed the economy and know they are not politically popular these days. It’s time for these companies to wake up to the fact they are being used.
The Coalition claims that it hasn't coordinated with the big banks, but a closer look at the team of financial reform lobbyists working for the Business Roundtable and the Chamber reveals some evidence that it was created as a front group to push Wall Street's policy agenda. Rep. Melissa Bean and the shadow bank lobbyist in charge of her office, Chamber of Commerce lobbyist & ex-chief of staff John Michael Gonzalez. Rep. Melissa Bean and the ex-chief of staff that still seems to run her office, shadow bank lobbyist John Michael Gonzalez. There was only one lobbying firm working for both the Chamber and the Business Roundtable on financial reform issues during 2009: Peck, Madigan, Jones & Stewart, a firm with rich connections to centrist Democrats. Peck, Madigan has lobbied for each Coalition parent around derivatives reform. At the same time, the firm has also lobbied for Deutsche Bank and the International Swaps and Derivatives Association -- in other words, for big banks with a healthy appetite for derivatives trading. Since derivatives lobbyists for the Chamber and the Business Roundtable have so much in common with big bank lobbyists -- in fact, they're the same people -- it's not a giant leap to suspect that this "derivatives end-users" coalition has actually just been set up by big bank executives who are afraid of their own toxicity. Then there's the fact that Bill Daley, JPMorgan's in-house Democratic rainmaker, was a recent chair of the Chamber's Center on Capital Markets Competitiveness, a big bank-driven effort to shape the financial reform debate. Peck Madigan also lobbied for that group. ThinkProgress has also exposed how the Chamber is working with big banks to kill reform. And JPMorgan CEO Jamie Dimon is on the board of the Business Roundtable, which has hired a number of Goldman Sachs lobbyists. Unfortunately, the shadow bank lobby is a force to be reckoned with, and has won substantial victories for big banks throughout the financial reform process. In December, for instance, Representative Melissa Bean forced a negotiation with House leadership over federal preemption language in the financial reform bill. Bean succeeded in winning a major concession for the big banks, behind closed doors. Bean was taking her cues from the shadow bank lobby. Her former chief of staff, John Michael Gonzalez, went through the revolving door in 2009 to become a bank lobbyist. Gonzalez works at the Chamber's favorite lobbying firm on financial reform issues: Peck, Madigan. Here's one issue his team was lobbying around on behalf of the Chamber, according to a recent disclosure filing:
H.R. 4173, the Wall Street Reform and Consumer Protection Act; Preemption provisions; Rep. Bean preemption amendment. (emphasis mine)
(While levels of disclosure are typically woefully lacking in lobbying disclosure filings -- and Peck, Madigan has had issues in this area surrounding its work for the Chamber -- I applaud the firm for their unusual openness here.) d The new Melissa Bean: Tom Carper with his ex-chief of staff Jonathon Jones (no picture available) -- now a shadow bank lobbyist at Peck, Madigan.  These days, Democratic Senator Tom Carper is the new Melissa Bean. He is sponsoring a preemption amendment that will keep states from being able to implement stronger consumer protections than the federal government. The amendment is clearly big bank-driven. But why Carper? Plenty of other Senators could have gone to bat for the big banks on this issue. The answer is once again found in the revolving door data we compiled for Big Bank Takeover: Carper's former chief of staff, Jonathon Jones, is a partner at Peck, Madigan -- the same firm that lobbied for the Bean preemption amendment, and the same firm where John Michael Gonzalez, Bean's ex-chief of staff, now works. Carper and Jones are extremely close, to the point where the Senator has "gushed" to Politico about how much he likes his former chief of staff. This is how the seeds of financial destruction are sown: with real people leveraging real relationships to win major policy concessions for big banks. If final negotiations around financial reform happen behind closed doors, as they did when Bean won her preemption fight with House leadership in December, the big bank lobby and its army of well-connected insiders will continue to win on the Hill. Today's Congress will once again facilitate reckless gambling and predatory behavior by too-big-to-fail banks. Transparency and openness are the only antidote to a big bank lobby that prefers to operate in the shadows; will Congressional leaders embrace these principles, and negotiate the final elements of the bill out in the open? Originally posted at
Over the course of the financial reform process, the six biggest banks and their trade associations have waged an historic assault on democracy, hiring hundreds of revolving door lobbyists and spending hundreds of millions of dollars to push their legislative agenda, according to a report released today by the Campaign for America's Future. The report, Big Bank Takeover: How Too-Big-To-Fail's Army of Lobbyists Has Captured Washington, shows how the six too-big-to-fail banks have hired 243 lobbyists who once worked in the federal government, including 202 who used to work in Congress, with others having worked at the Treasury, the White House, or a relevant federal agency like the SEC. (I authored the report, with assistance from researchers at This translates into an average of 40 revolving door lobbyists per big bank. Previous studies, including one by Public Citizen, have shown that the finance industry is spending $1 million dollars a day to fight financial reform and employing 940 former federal government employees. "Big Bank Takeover" shows that the six biggest banks -- JPMorgan Chase, Goldman Sachs, Citigroup, Bank of America, and Wells Fargo -- account for a disproportionate share of this activity. The revolving door lobbyist number includes 54 former staffers to the Senate Banking Committee and the House Financial Services committee (or a current member of that committee), 33 former chiefs of staff, and 28 former legislative directors. Citigroup leads the big banks with 55 revolving door lobbyists, though the federal government was its largest shareholder for much of this period (2009-2010). These lobbyists left their old jobs for a simple reason: there is a fortune to be made working the halls of Congress on behalf of too-big-to-fail banks. Steve Bartlett, a former member of the House Banking Committee (now the Financial Services Committee), brought home $1.6 million in 2008 as head of the Financial Services Roundtable. SIFMA, another lobby, paid its top official, Timothy Ryan, $2 million in 2008. Ryan is a former JPMorgan executive and former director of the Office of Thrift Supervision. SIFMA recently hired former Representative Ken Bentsen as head of its DC lobbying operation. Bentsen keeps a framed photograph of a landmark deregulatory bill, Gramm-Leach-Bliley, on the desk of his office, and for good reason: that bill helped spur the growth of megabanks like Citigroup, JPMorgan Chase, and Bank of America that fund SIFMA and pay his salary. Bentsen was on the other side of the revolving door when that bill was passed, in 1999 -- as a member of the House Financial Services Committee. He has a lot of company in that respect: Big Bank Takeover shows that many of these lobbyists worked in government during the 1990s when the too-big-to-fail banking sector got a big boost from bipartisan efforts to deregulate the financial sector. Former House minority leader Dick Gephardt and Senate majority leader Trent Lott have a combined 16 former staffers who are now working for big banks, including Citigroup and Goldman Sachs. Lott and Gephardt are also lobbying for the banks. Senator Chris Dodd leads current members of Congress with five former staffers now working as big bank lobbyists. One big bank lobbying firm, Porterfield, Lowenthal & Fettig has ties to the Banking committee chair, Chris Dodd, the ranking member, Richard Shelby, and Dodd's rumored successor as chair, Tim Johnson. Big money buys this kind of mercenary army. Between campaign contributions, lobbying spending, and trade association activity at SIFMA, the ABA, and elsewhere, the big banks and their main lobbies have spent close to $600 million since the first major federal bailout of the financial sector happened with Bear Stearns in March 2008. Of course, that's a drop in the bucket compared to the $160 billion these banks have received from the US Treasury, and the trillions in free money they've received from the Federal Reserve. But these investments are more than enough to buy their way in Washington. And Wall Street's lobbying operation is actually much more concentrated than the healthcare lobby. For the healthcare lobby, put together a similar list of revolving door lobbyists and we found over 500 healthcare lobbyists who used to be Congressional staffers. But that was for literally hundreds of companies in the healthcare sector. The 240 we came up with this time work primarily for six big banks. These big bank lobbyists want to operate in the shadows. The banks are hiding much of their lobbying activity in a stealth lobby of generic business associations like the Chamber of Commerce. The report points to several instances of how banks are routing their political spending through these organizations, but there are likely many more examples. The Washington Post reported last week that lobbyists are now looking to Congressional leaders to work out the final details of the bill in closed-door conference. Big Bank Takeover notes that at least one infamous deregulatory catastrophe happened behind closed doors: the Enron loophole, a legislative exclusion in 2000 derivatives legislation which has been blamed for spikes in energy prices. The same lobbyists that pushed for that measure are on the scene once again. The report was released in anticipation of next week's Showdown on K Street, when thousands of Americans will descend on DC in the hopes of setting things straight with the big bank lobby. I'll have more on the big banks and their influence army throughout the week. In the meantime, all this data also exists in an open format at, so if you'd like to take a closer look you can check it out there. Special thanks to Priscilla for helping compile it, as well as Matthew, co-founder of was also an invaluable resource in putting it together. Originally posted at the Institute for America's Future,
The Goldman-Paulson fraud suit threatens to throw a spotlight on a realm of Wall Street that has escaped most scrutiny throughout the financial crisis: the hedge fund industry. Top hedge fund managers profit from Wall Street's business model of fraud and collusion more than any CEO at the big banks, but tend to evade accountability because of the opacity of their industry and their extraordinary power. One such hedge fund manager is Richard Perry. Perry, a former Goldman Sachs trader, became known as one of the subprime winners in 2007 -- one of the hedge fund managers who saw the crisis coming, and placed profitable bets that the housing market would collapse. Perry reportedly shorted $3 billion in subprime-related securities, netting a $1 billion profit on the trade. Around the same time, in late 2006 and 2007, Perry's hedge fund, Perry Corp, began buying up shares in a certain financial management company that had a close business relationship with Goldman Sachs. His stake grew from 5% to 8% (around $30 million in early 2007), to the point where Perry Corp was disclosed as a major shareholder in the company in the prospectus for one CDO put together by Goldman in August 2007. That company: ACA Capital, the same firm wrapped up in the Goldman Sachs-John Paulson CDO deal that the SEC has deemed fraudulent. Perry's winning billion-dollar subprime short, alongside his major investment in ACA, is all the more notable because of his ties to Goldman Sachs. He was a star trader at the bank under former Goldman Sachs head Robert Rubin, and has partnered with the bank on investments in recent years. Perry is extremely close to Rubin, outside of the professional context -- former babysitter to his children, teaching assistant, and advisory board member at Rubin's Hamilton Project. Despite being extremely close to someone who made $1 billion shorting the subprime market, Rubin has called the financial crisis a "perfect storm" that no one saw coming. Perry is also the nephew of former Bear Stearns CEO Jimmy Cayne. Bear Stearns was the biggest shareholder of ACA before it went bust. Which subprime securities did Perry short to score $1 billion? Were they Goldman Sachs CDOs? Was ACA involved? These are all questions worthy of investigation. But what makes Perry's investment strategy even more suspicious is the fact that he has previously been investigated for a complex derivatives deal that played both ends of a trade. In 2004, with the help of financial engineering by Bear Stearns and Goldman Sachs, Perry acquired a large voting stake in a pharmaceutical company (Mylan Laboratories) that was considering the takeover of a smaller company (King Pharmaceuticals). Perry owned a significant stake in King, and also hedged against a drop in Mylan's stock price. As Mylan's biggest shareholder, Perry could vote through the merger, causing a drop in Mylan's stock price but reaping up to $28 million on the deal because of his investment in King and his Mylan hedges. The SEC ultimately fined him $150,000 for failing to make the proper disclosures. Perry hired a former SEC official, William R McLucas, to argue his case. Even that probably wouldn't have happened if Perry had not gotten on the nerves of Carl Icahn, the next biggest shareholder of Mylan. Were Wall Street investors like Perry, Goldman, and Paulson intentionally using corporate shells like ACA (and AIG) to dupe the marketplace and funnel profits back to them? And were they using their connections to the companies -- ownership stakes, personal ties, and so on -- to encourage them to participate in these risky deals? At this point, only one thing is for certain: further investigations are needed. Originally posted at Eyes on the Ties.
The death toll in the West Virginia mining explosion has climbed to 25, the worst mining accident since 1984, and the company that owns the mine, Massey Energy, is coming under intense scrutiny for a record of safety violations that suggests it could have done far more to guard against disasters like the one that occurred on Monday. Think Progress has compiled extensive data on violations at Massey's Upper Big Branch Mine, where the accident occurred, showing that the company has been cited a staggering 3,007 times since 1995 for violations at that mine, with assessed fines of $2.2 million (Massey is currently contesting $1.1 million of that amount). Disregard for worker safety was central to Massey's business model: keep labor costs low to keep profits running high. That meant breaking unions and issuing memos like this one from CEO Don Blankenship which informed mine superintendents that "RUNNING COAL" was more important than any safety-related activity in the mines. Specifically, Blankenship made a derisive, parenthetical reference to the construction of overcasts, which are mine ventilation structures designed to keep workers alive and breathing.
Don Blankenship

Massey Energy CEO Don Blankenship

The company's environmental record is similarly grotesque. The company is a leading practicioner of mountain-top removal, a horribly destructive method of mining. According to Forbes, in 2001 after 30,000 gallons of sludge emptied out of one of its mines into a nearby river with nary a peep from Massey, it won superlative condemnation from the state's mine safety board, which called its response "absolutely the worst behavior by any company that any member of this board has ever seen over the decades that this board has been in existence." Blankenship is the sort of fringe lunatic readily embraced by the US Chamber of Commerce, where he sits on the board of directors. He calls environmental advocates "greeniacs," has described the Charleston Gazette as a collection of "communists and atheists" and likened them to Osama bin Laden, and in 2004 launched a sinister, multi-million dollar campaign to back a candidate that swung the West Virginia Supreme Court in his favor. That bit of political intervention served as the inspiration for a John Grisham novel. And then there is this chilling Blankenship quote from 1984:
“Unions, communities, people — everybody’s gonna have to accept that, in the United States, we have a capitalist society. And that capitalism, from a business viewpoint, is survival of the most productive.”
Who stands behind outlandish corporate villains like Blankenship? Wall Street, for one thing. Massey saw big gains in recent months on the strength of profit projections. Stanley Druckenmiller's Duquesne Capital gave Blankenship a vote of confidence by buying 6.2% of the company earlier this year. Druckenmiller was once George Soros's right-hand man, helping him break the British pound in 1992. To their credit, several banks, including Bank of America, have apparently stopped financing Massey's operations in recent years. But overall, Wall Street (surprise surprise) had failed to price in the rising risk of utter catastrophe at one of Massey's coal mines. Former NSA director Bobby Ray Inman has stood by Blankenship and supported his leadership of Massey for over two decades. He is Massey's lead independent director (and its longest-serving board member), having joined the board in 1985, when it was still a subsidiary of Fluor Corp (and Blankenship was not yet head of the company). Under Inman's watch, Blankenship was promoted to CEO. In 2000, Massey split from Fluor, and Inman (and Blankenship) went with it. Year after year, as a member of Massey's compensation committee, Inman has approved multi-million dollar payouts for Blankenship. In 2008, Blankenship made $19.7 million, all told, and he reportedly got a raise in 2009. Inman is about as elite as you can get: Clinton's nominee for Defense Secretary in 1993 (he eventually withdrew); on the boards of numerous companies, many of them defense contractors; an honorary member of the Public Agenda Foundation, along with social security looter Pete Peterson; and, of course, a member of the Bohemian Club. All signs point to Blankenship, Inman, and other members of Massey's leadership facing some tough questions over the coming months. One place to find them: at the company's annual shareholder meeting, May 18 at 9am at the Jefferson Hotel in Richmond, Virginia.
The citizens' investigation of the Bubble Barons concluded last night, after a month of digging deep on the super-wealthy individuals who benefit most from our bubble economy. Thanks to all who participated! I am currently working on a final piece on the investigation and our findings. In the meantime, to give you an idea of how much information the bubble baron research crew dug up, take a look at the following two network graphs. The first one shows a snapshot of data on the bubble barons prior to the investigation. The second one shows this network graph after the investigation. The nodes represent bubble barons and the organizations and individuals they are connected with, and the lines represent relationships between them. A network graph of the bubble barons, before the investigation (click through for the full-size image):
LittleSis data on the bubble barons, before the investigation.

LittleSis data on the bubble barons, before the investigation.

And after the investigation (again, click through):
The bubble baron network, after the investigation.

LittleSis data on the bubble barons, after the investigation.

Believe it or not, these graphs actually exclude the bubble barons' charitable giving -- that requires a separate graph, coming soon. The graphs show how much research went into this project. At this point, they are too cluttered to be extremely informative, but there are lots of fascinating graphs within this graph -- it's a question of analyzing and paring down the data, which I'll be doing over the next few days. A quick glance at the second graph also yields some insights: Harvard University, unsurprisingly, is the biggest dot (meaning that it has the most connections to bubble barons). On the other hand, I didn't go into this investigation expecting to see the Prostate Cancer Foundation at the center of the graph, but many bubble barons apparently have ties to ex-felon Michael Milken's charitable effort, which has been central to his efforts to revive his reputation. It should be noted that as with any large-scale investigation, some research targets got more attention than others. LittleSis analyst rjgwood is responsible for the incredibly rich data on Milken, for instance. A handful of bubble barons slipped under the radar, however. In some sense, this investigation will never end truly end on as long as these folks control billions (trillions?) of dollars, and make decisions that affect our lives profoundly, they deserve far more scrutiny (and we plan on giving it to them). Though the actual bubble baron research has concluded (in some sense), I'll be working over the next few days to put together a final piece with findings the investigation, pulling stories out of this data set and working with the most active bubble baron researchers to figure out what findings to highlight. Drop me a line if you would like to suggest anything in particular. Thanks to all who participated in the project!
Score one for Wall Street. The student loan industry has convinced Senator Blanche Lincoln to vote against the healthcare reconciliation bill on the grounds that it contains "matters unrelated to healthcare" -- code for student loan reform, as David Dayen notes. How did the student loan industry secure Lincoln's support? The same way they found other Senatorial defenders for their wasteful subsidies: the power of money, deployed through a combination of campaign contributions and strategic lobbyist hires. In Lincoln's case, the simplest answer is Kelly Bingel. Bingel has been lobbying for the student loan industry since mid-2009, and is extremely close to Lincoln. She was the Senator's chief of staff from 2003 to 2005, and a longtime Lincoln aide before that. She has since joined Mehlman, Vogel, Castagnetti, a lobbying firm which has played a central role in the healthcare fight, lobbying for AHIP, PhRMA, and many other insurance and pharmaceutical companies. A recent Roll Call article described Bingel as Lincoln's "alter ego,", and said that Bingel "has the ear of her former boss...first on the list of the Senator’s callbacks" according to one former colleague.

Student loan lobbyist Kelly Bingel and Sen Blanche Lincoln. Their ties also extend beyond the professional sphere: Lincoln is the godmother of Bingel's son, according to this interview Bingel gave to her old sorority. Ironically, considering the matter at hand, Senator and lobbyist were brought together by their college ties. Lincoln and Bingel were both members of the same sorority, Chi Omega (at different schools, however). Here is the story, as told to Chi Omega, of how Bingel and Lincoln's sorority sisterhood brought them together in DC:

While I was there, my mother, who was living in Arkansas, sent me a newspaper clipping about a young woman who had just been elected to Congress after defeating a 24-year incumbent. The young woman – Blanche Lambert - was a Chi Omega. I remember talking on the phone with my mom saying, “I’d love to meet her!” Fortunately, one of the congressmen I had covered as a newspaper reporter recommended me to Blanche. The first thing she said when she saw my resume was, “Oh, she’s a Chi Omega!” In short, Chi Omega opened the door for me to work with the woman who would be an amazingly positive influence in my life and who would become – a decade later – my son’s godmother.
All these ties have assured the student loan industry access to Sen. Lincoln, and likely swayed her to vote "no" on the reconciliation bill. Of course, the lenders paid Mehlman $150,000 last year for the privilege. Before the release of Money-Changers in the Senate, the Campaign for America's Future report on the student loan influence game, Bingel was not yet linked to the student lending lobby. This is perhaps due to the fact that the industry used quite a daisy chain of corporate shells to hire her on to the cause. Bingel works for Mehlman Vogel Castagnetti, which was hired by the Law Offices of John Dean on behalf of an obscure group called the Student Loan Coalition. Who is the Student Loan Coalition? It's not entirely clear, but here's a clue: Dean's other major client is the Consumer Bankers Association, whose members include Citigroup, Chase, Wells Fargo, and a number of other student lenders. Meanwhile, Lincoln's current chief of staff, Elizabeth Hurley Burks, has strong ties to another student loan industry lobbyist: Jim Turner, formerly a Representative from Texas. Burks was Turner's chief of staff until 2005, and followed him to the lobbying firm Arnold & Porter before joining Lincoln's staff. Turner is now lobbying for Texas Guaranteed Student Loan Corp, a student loan guarantor that is an associate member of the Consumer Bankers Association. Lincoln's ties to the student loan industry don't end there. Nebraska-based lender Nelnet only employs one lobbying firm, Avenue Solutions. There are three partners at Avenue, and one of them is Lincoln's former health policy adviser, Elizabeth Barnett. Avenue Solutions' three partners donated $10,300 to Lincoln in 2009, an average of over $3,000. And on top of all that, Sallie Mae's PAC maxed out to Lincoln's primary account in 2009. One of Lincoln's top donors, DNC vice chair Lottie Shackelford, is a Sallie Mae lobbyist. Arkansas isn't exactly a student loan origination boom state, so Lincoln can't say she's standing up for jobs (though that claim is a dubious one even for Senators from Sallie Mae's home state). Instead, she's talking about "transparency":
“This process that’s being used in reconciliation is a process that doesn’t have the transparency that I think Americans are crying out for,” Lincoln said, “and it doesn’t have the debate that shows the initiative of being thorough about how we do things.”
The line is reminiscent of the loan industry critique of the reconciliation bill: that student loan reform is "buried" in the healthcare bill and that the legislation was not given proper consideration by the Senate. If Lincoln acted with even a modicum of transparency about how she arrived at her decision to oppose the reconciliation bill, she would disclose her recent contacts with Kelly Bingel and other industry lobbyists, as well as her recent campaign receipts from the industry. How illuminating it would be for a Senator to embrace transparency and say why they were taking such an unprincipled, impractical stand on behalf of moneyed interests, and against the interests of students in Arkansas. This post originally appeared on
Stephen Schwarzman and David Rubenstein are co-founders of two of the largest private equity firms in the world, the Blackstone Group and the Carlyle Group. Both are under investigation by the bubble baron research group, with seanhartnett and Dan doing a tremendous job researching their networks and following their money. As it turns out, Schwarzman and Rubenstein are closely connected to one another through a number of shared institutional affiliations. So far, Dan and seanhartnett have connected both of them to JP Morgan, the Council on Foreign Relations, the Asia Society, the Business Council, and the Kennedy Center for Performing Arts. Rubenstein rises to the top of Schwarzman's interlocks tab, and vice versa. Two days ago, Dan noticed that Rubenstein was succeeding Schwarzman as chair of the Kennedy Center, and wrote a note:
Bubble Baron David Rubenstein of Carlyle Group will succeed Bubble Baron @Stephen Schwarzman of Blackstone Group as chairman of the Kennedy Center for the Performing Arts in May (NYTimes, 3/3/10). The chairman gets to sit in a box every year with the president. Rubinstein hopes to use his position to bridge the “increasing divide in Washington between Republicans and Democrats,” since “the arts help bring people together." (NYT, 3/3/10)
Rubenstein is primarily a Democratic donor, so it makes sense that he would take over for Schwarzman, a Republican donor, during a Democratic administration. But it doesn't look like they need the arts to bring them together. For another angle on their relationship, watch this Charlie Rose interview with Rubenstein and Schwarzman. They discuss their relationship starting around 13:00. Here's the transcript:
MARIA BARTIROMO: Now, on the one hand, you're competitors. On the other hand, you'll team up on deals. How does that work? STEPHEN SCHWARZMAN: Well, actually, it works pretty well, to tell you the truth. MARIA BARTIROMO: Putting billions and billions of dollars together enables you to buy a bigger company. STEPHEN SCHWARZMAN: That's true, and, you know, David's fun to work with.
At this point, with Schwarzman smirking, the camera cuts to Rubenstein, who appears to be attempting to destroy his coffee cup with a death stare:
Schwarzman's smirk v. Rubenstein's Death Stare.

Schwarzman's smirk v. Rubenstein's Death Stare.

Rubenstein then discusses how easy it is to work with his bubble baron friend:
I am surprised sometimes at how easily it works, in the sense that Steve and I may be competing on a deal, and at the same time we might be teaming on a deal. And you just have to keep it very separate and recognize that there are certain Chinese walls and certain deals that you can't talk about things with each other, and sometimes you're talking about everything because you're teaming up.
A very complex relationship, indeed. Chinese walls refer to the legal barriers that are supposed to guard against conflicts, collusion, that sort of thing. Typically, Chinese walls are actual information barriers erected between different divisions of an investment firm -- keeping the research and underwriting departments of a bank separate, for instance. So in the course of their conversations, as Rubenstein says, these two private equity kings deftly negotiate imaginary Chinese walls that are supposed to keep them from profiting from anti-competitive behavior. How often do Blackstone and Carlyle invest together? Do Schwarzman and Rubenstein donate money to the same organizations? Who else do they work with? (at least two other bubble barons: Pete Peterson and William E Conway). These are the kinds of questions that keep arising during the bubble barons investigation; their networks are extremely dense, and they often work together. Their monopolies are harder to detect than they were when Roosevelt and Taft took it to the trusts, but they're still there. What will it take to bust 'em?
One of the major objectives of the bubble barons investigation is to figure out where, exactly, all that money is going. Where are these billionaires investing their money? Which politicians do they support? Which charities benefit from their largess? Today, I'm going to go over strategies for researching charitable contributions, and I'll use my bubble baron, hedge fund manager Julian Robertson, as a case study. Several LittleSis analysts have gotten a head start researching these questions - this will offer a bit more direction on how to research these questions. While googling julian-robertson donation will certainly get you somewhere, there are ways to get much more systematic, detailed information about charitable activities. 1. Find the bubble baron's foundation(s). This can typically be accomplished by reading a basic bio of your bubble baron, or with a google search (eg, julian-robertson foundation turns up The Robertson Foundation). Once you've discovered the foundation, add it to LittleSis and link it back to the bubble baron by adding a donation relationship between them. If the bubble baron also sits on the board, add a position relationship between them. 2. Find the foundation's website. Most foundations will have websites (eg: Some will share extensive information about the foundation, including lists of grantees and board members. If they do, you should add it to the foundation's profile. For board members, create position relationships between the foundation and the individual. For donations, create donation/grant relationships between the foundation and the recipient. If there are many donations listed, try to find and add the 10 largest donations. Even if the foundation has a website, however, they often don't offer very detailed or comprehensive information. For instance, if you search the website of Julian Robertson's foundation for iMentor, you won't find anything. But the foundation gave $2,000,000, one of its top 5 grants, to the organization in 2008. How did I discover that? On to the next step... 3. Find the foundation at and download its latest IRS filing. Guidestar offers free access to filings that tax-exempt foundations must make with the IRS. In order to access them, you must sign up for a free account, then search for the foundation:
Search Guidestar

Search Guidestar

Once you've searched for and found Guidestar's page for the foundation, click on the link that says "990s" -- these are the filings that charities must make with the IRS:
Finding 990s at guidestar.

Finding 990s at guidestar.

Then click on the latest 990 to download and view it, and save the link location to add as a reference link later on. 4. Find the organization's board, grantees, and other key information in their IRS Form 990. While charitable organizations are not required to disclose where they got their money, they are required to disclose where they give it -- as well as other key information, including their board members, highest-paid officers, and revenue figures. You can find a list of grantees in part XV, line 3 of the 990. Sometimes, you will be directed to an attachment at the end of the filing:
From the Robertson Foundation 990.  The list of grantees is at section XV, line 3.

From the Robertson Foundation 990. The list of grantees is at part XV, line 3.

And schedule A:
The list of Robertson Foundation grantees, on Schedule A of the 990.

The list of Robertson Foundation grantees, on Schedule A of the 990.

You can find a list of board members in part VIII, section 1:
Robertson Foundation board members in 990 Part VIII.

Robertson Foundation board members in 990 Part VIII.

5. Add key information to LittleSis. Once you find the grantees and board members, add them to LittleSis (as long as they're not already there). If there are more than ten grantees, pick the ten largest grants (or ask kevin about the possibility of doing some bulk adding). For grantees, create donation relationships between the foundation and the grantee. For board members, create position relationships between the foundation and the board member. Once again, we're shooting to add the bubble baron's foundation and the ten recipients of the foundation's largest grants in the past year. If you want to dig deeper, go for it, but if we shoot for that minimum goal we should be able to develop an accurate picture of the bubble barons' charitable activities. *** I've added the Robertson Foundation's 50 largest grants in 2008 to LittleSis. The largest was a $10.6 million grant to the Environmental Defense Fund. As is often the case with large donors of any charitable organization, Robertson sits on the board of EDF. Another EDF board member, Susan Mandel, is the wife of Stephen Mandel, a hedge fund manager who used to work for Robertson at Tiger Management. Back to iMentor -- as it turns out, iMentor was started by hedge fund manager John Griffin, another former Tiger Management employee and a trustee of the Robertson Foundation. Robertson is a major donor to a number of educational initiatives, including one charter school started by his son, Julian Spencer Robertson. The Korean Evangelical Mission for Hispanics, another Robertson grantee, was started by the mother of Bill Hwang, a hedge fund manager and former Tiger employee. You get the idea: Robertson funds charitable organizations in much the same way he seeds hedge funds, by looking to former employees and associates first and foremost. A superficial research effort can tell you that he is interested in education, the environment, and medical research, but a deep dive on charitable giving can tell us much more about where he directs his money.