Analysis: U.S. Supreme Court Campaign Finance Decision

Is it not remarkable, dear Reader, that mere days after Republican Scott Brown upsets the U.S. Senate special election (and Obama Administration referendum), that the U.S. Supreme Court made a landmark ruling, rolling back campaign finance and anti-corruption efforts? The case was two-fold, as far as we can tell, in its implications: first, it holds time-based bans upon corporate political advertising and politicking (namely, preventing those interests from advertising too near an election day); second, it frees corporations and other such interests to make direct contributions to political candidates, rather than filtered through special interest groups. The decision was leveraged upon the First Amendment of the U.S. Constitution, suggesting that restricting corporations from doing the aforementioned activities was impinging upon freedom of speech.

This actually does have coherence, as we understand it: corporations are considered an individual under corporate law, legally on par with an actual living human being, such as yourself. So, in essence, yes, a corporation does have just as much of a right to contribute and politick for its candidate of choice as you; that they have vastly more money to throw around than you is really trivial. At least, it's trivial to the Supreme Court. The full implication of the decision perhaps did not sink into justices' thoughts as cast their votes. Let us explain:

Consider the organisation known as Goldman Sachs, everyone's favourite vampire squid. As a financial institution, Goldman can borrow an effectively unlimited amount of money from the Federal Reserve, and then turn around and invest that money into something which pays a guaranteed return. At present, much of that would seem to be Treasury Bills; in essence, Goldman Sachs permits the Federal Government to borrow from itself, but make it look otherwise, and make a profit at the same time. This cozy little arrangement, along with all the other cozy little arrangements Goldman has, seems to make a lot of people very angry. Now, let's say that a vociferous group of contenders for Congress run on a "let's shut down all the big banks" platform, and experience massive support from across the U.S.

The Lord's work would seem to be in jeopardy, no? At that point, is it not a good investment to borrow, say, $25 billion from the U.S. Treasury, and invest that in supporting the candidates who are on the "let's keep Wall Street bonuses flowing" platform? The 'return' off of that 'investment' is not necessarily quantifiable, but it is indeed qualifiable: Goldman Sachs continues to survive. That, perhaps, is the best investment that Goldman could have made with someone else's money.

We point out there is no longer any reason whatsoever that Goldman cannot do this exact manoeuvre during the 2010 Congressional elections. Nor, indeed, does anything prevent JPMorgan Chase from doing the same thing, or Citigroup, or Wells Fargo, and the rest of the too-big-to-fail crowd. Heck, the Federal Reserve System itself could start running advertising if it wanted to! Call us alarmist? Please feel free. But remember that there is nothing which will prevent this from happening.

If anyone notices how momentous this decision was, we have no doubt there will be efforts of dressing it up as a good thing; consider this hatchet piece from the Atlantic. However, in our opinion the Court has simply handed over near-total political control of the U.S. Government to large corporate interests on a silver platter. That situation is perhaps nothing new per se - consider Goldman Sachs' apparent ownership of the U.S. Treasury - but it is much, much more of the status quo, and additionally set in concrete. Going forward, we fear there will forever be a shrinking ability of small interests (e.g. individuals, small entrepreneurs, et cetera) in getting their message to their supposed representatives in Government. That could change, as an aside, if the apportionment lawsuit in Mississippi is actually successful, but the outcome of that case is far from certain.

What is certain is that the large corporations which will exploit this Supreme Court ruling will do so to the hilt, because the Depression puts their very survival at stake. Without even the most ineffective of legal restraint on their politicking, we would not be the least bit surprised if more and more high-level officials in the Government come from super-huge banks and large corporate interests, like the defence industry and healthcare, et cetera. Put simply, the sovereignty of the United States has been transferred, de jure, from the American Citizenry, to the largest and most powerful corporations. The Government must and will respond accordingly.

What this will mean for American Citizens trying to scrape their way through the Depression is fairly easy to predict. The average American will feel the pain, because he or she will be forcibly squeezed of their wealth, for the benefit of these corporate interests. The U.S. Government will continue to everything it can in order to reinforce the existence of those institutions which ethically should be left to die. The cost of these corporatist heroics will come in the forms of more bailouts, more Government largesse, higher taxes, higher inflation, and more destruction of the non-corporatised economy.

Man of the People

It seems that Mr. Lawrence Summers, chief economic adviser for the Obama Administration, has had a comfortable existence post-Harvard. According to the Financial Times, Mr. Summers received "$5.2m in compensation over the past [two years] for a part-time advisory role at D.E. Shaw," as well as "about $2.7m for speaking appearances, including several to banks such as Citigroup, Goldman Sachs,... JP Morgan," among others (we've seen references to the investment banks, like Lehman and Merrill Lynch).

Mr. Summers worked for D.E. Shaw for only one day a week for two years. We find it is rather difficult to see why he enjoyed such a kingly stipend from an hedge fund with such a stringent recruitment process. He did not seem to do very much, other than being an overpaid glad-hander and a recognised name to make D.E. Shaw look snazzy. Perhaps he was indeed just a sounding-board for the traders at the hedge fund... but we think even a really smart person would be happy to be a once-a-week sounding-board for less than $50,000 a sounding.

It is probably very true that Mr. Summers has not actually done anything inappropriate or illegal, as the Financial Times points out. However, we feel it is not a good sign that the chief economic adviser to this Administration is a person who made millions working a nebulous job at a math-heavy hedge fund like D.E. Shaw. Mr. Summers was notorious for his bulldozer tactics as President of Harvard, so we wonder for whom will he now bulldoze. Will it be for the benefit of the taxpaying American citizens, or for his past (and, presumably, future), employers?

Frankly, we feel that Mr. Summers' revealed relationship with D.E. Shaw, as well as the super-banks and investment banks, is a black mark on the Obama Administration. It is becoming increasingly clear - perhaps excruciatingly so - that the brains behind the Administration are not young, fresh faces. Rather, they are the hardened gamblers who helped to get the United States, and indeed the entire world, into the Depression in the first place.

The Federal Reserve as Superhero?

The United States has a very long tradition of superhero worship. The ongoing popularity of superhero movies, such as The Watchmen and Hancock seems to justify what we see. There is, perhaps, nothing that the average American audience likes more than a plain schmoe who's a superhero and a regular guy at the same time.

In the past, we've seem to remember that the Federal Reserve was a plain and relatively straightforward organisation. Even under the much-maligned Sir Alan Greenspan, the Fed was pretty vanilla. No off-balance-sheet loan programs, no toxic mortgage debt... in a word, no mystery whatsoever.

Then Mr. Ben Bernanke came along, and then the crash in October 2008 occurred, and suddenly the Federal Reserve is looking even spookier than Goldman Sachs. Now, far from being a stoic, conservative organ of finance, the Fed has turned itself into a front-line warrior, running around like a berserker of old with monetary axes in each hand. Yet, it still lays claim on being a classic, responsible central bank.

Take, for instance, the recent news that the Fed will buy $300 billion of U.S. long-term bonds, as well as $750 billion of mortgage-backed securities. This, added to about $1.25 trillion of toxic assets with unknown -- probably zero -- value, around $1 trillion of government agency debt, and $2 trillion's worth of mystery, creates a balance sheet that would make a hedge-fund manager blanche.

Perhaps the cultural idiom of hero worship has gone to Mr. Ben Bernanke's head. Maybe he sees himself as the mighty superhero Helicopter Ben, successfully fighting off the minions of the evil genius, Deflation Man. We don't know for certain, since we've never met the man, but he strikes us as just an academic schmoe with delusions of grandeur. Whatever the case, though, Mr. Bernanke is putting what's left of financial stability in the United States at risk with his heroics.

Bailouts are the Ultimate Corruption

As we had suggested earlier in the month, a token bailout has been given to General Motors and Chrysler. $17.4 bullion may seem like a ton 'o cash, but its chump change for these sieve-like companies. The Big Three have hit the proverbial iceberg; it's only a matter of time until they go propellers-up. Unsurprisingly, six in ten Americans would prefer to see those propellers than have their tax-dollars go towards making more gas-sucking, barely-functional fashion excessories. And who could blame such sentiment?

Even more odious, in our opinion, is the use of TARP (i.e. taxpayer) money to fund bonuses on Wall Street. The complete hypocrisy of, say, AIG's Jay Wintrob getting $3 million in 'retention awards' is mind-numbing. We personally feel so disgusted that we look for the lynch mobs forming, hunting down Wall Street's finest and stringing them up in Central Park... but we instead see complacence. The American public seems content to whine vaguely about things, but do nothing to stop out-of-control lemon socialism.

These bailouts, besides unwise and reckless, are the signs of corruption so deep and pervasive it makes our head spin. For example, Mr. Henry Paulson, Jr. is a former Goldman Sachs CEO. As Secretary of Treasury and manager of TARP, Mr. Paulson has given his former employer $10 billion of unregulated cash. If this isn't a conflict of interest, we don't know what is. Mr. Paulson also helped remove Goldman Sachs from the old net-capital rule; last we checked, before its recent, cynical move to become a bank, this allowed Goldman to leverage their assets-to-capital to around 30:1 - a speculative foray which taxpayers are now expected to clean up the mess from.

Therein is the rotten core of the affair: public money has been usurped. Money which could have gone towards any number of productive things -- which would have given real, measurable benefits -- instead are going towards rewarding those who created the mess in the first place.

These people -- the bankers, the auto CEOs, Mr. Paulson, et al. -- are so obscenely greedy we feel ill sharing the same nationality. Even though the entire world is in the 2007 Depression, they will still try to milk the system for every last dollar they can get. The callous disregard for the misery and suffering they are helping to create is staggering, but yet it is apparently greeted with cheers and accolades.