Friday, January 29, 2016

Who's Buying America's Politicians? Part II - Organizations

In Part I of this two part posting, I looked at the individuals who have spent the most money thus far during the 2016 presidential election cycle, buying political favour by spending their hard-earned cash on "outside spending".  As I noted, "outside spending" is defined as money that is spent by either groups or individuals that is (supposedly) completely independent of control by each of the candidates' election committees.   Since the 2010 Citizens United Supreme Court decision, corporations, trade associations, labor unions and other social welfare non-profits can spend unlimited amounts of money on federal elections and, in some cases, the identity of these donors can be kept confidential, preventing American voters from ever knowing who is buying political influence.  In Part II of this two part posting, I want to look at the top organizations that have funded outside spending groups and provide a bit of background information on the top three donors.

Here is a listing of the top 20 organizations who have funded outside spending groups during the 2016 election cycle:

The number one organization, Besilu Stables, is owned by Miami, Florida businessman Benjamin Leon.  Benjamin Leon Jr. was born in Cuba in 1944 and immigrated to the United States with his family in 1961 at the age of 16.  He is Chairman of the Board of Leon Medical Centers Inc., one of the larges healthcare institutions in the state of Florida.  The company was founded in 1996 and now has seven locations throughout Miami-Dade county.  The President of the company is now Benjamin Leon III, the son of the founder.  Leon Medical Centers employ more than 2300 medical professionals and serve more than 44000 Medicare recipients.  Here is a table showing his donations in this cycle:

Back in 2008, Mr. Leon donated $162,800 to John McCain's campaign as a bundler.

The number two organization, Rooney Holdings, is a family-owned, Tulsa-based company led by CEO and President Hon. L Francis Rooney III, the former Ambassador to the Holy See (the Vatican) from 2005 to 2008.  Rooney Holdings is the majority owner of Manhattan Construction Company, a subsidiary of Rooney Holdings.  It has built hospitals, schools, government buildings and sports facilities including the Dallas Cowboys Stadium and Houston's Reliant Stadium.   The company also built the visitor center at the U.S. Capitol.  Rooney Holdings is one of the United States largest privately owned companies.

In the 2014 election cycle, Francis Rooney was the 75th largest hard-money donor, contributing a total of $253,900 to conservative causes.

Here is a table showing Mr. Rooney's donations in the 2016 cycle:

I like the $100 donation to John Boehner in February 2015.  I guess every dollar counts.

Lastly, the number three organization, Fair Share Action, is a Super PAC that has a Democratic lean.  It was founded in August 2012 and is an arm of the Fair Share organization.  Its aims are to "provide every American with a fair shot at a good job, a secure future and a strong voice in our democracy".  Here is a table showing the top ten Fair Share Action expenditures in the 2012 presidential election cycle:

Here is a summary of its spending by cycle since 2012 and its total receipts and expenditures during the 2016 cycle:

In this cycle, Fair Share Action's two largest donors are as follows:

In the 2012 cycle, Fair Share Action's largest donors were as follows:

In case you have never heard of him, Tim Gill is an American software entrepreneur (Quark Inc.) and philanthropist.  He is an advocate for LGBT civil rights and the environment.  His foundation, the Gill Foundation,  has invested more than $277 million in programs and non-profit organizations throughout the United States. 

In this two part posting, I believe that I have provided you with enough information to, once again, conclude that America's politicians are for sale and the wealthy that live among us are bulk.

Thursday, January 28, 2016

The Sabans and the Clintons - Political Bedfellows

Updated October 2016

In this posting, I want to focus on one individual who has spent substantial money to get Hillary Clinton into the White House on more than one occasion.  

As pictured here....

...Mr. Haim Saban is the Chairman and CEO of Saban Capital Group.  While you've likely never heard of Saban Capital Group, it is a private investment company located in Los Angeles.  It specializes in entertainment, media and communications and currently owns Univision, Celestial Tiger Entertainment and Astro, the largest pay TV platform in Malaysia.  It also owns MNC, Indonesia's largest media company and Partner Communications, an Israeli telecommunications company.  It also holds the rights to Power Rangers.  Hamid Saban was born in Egypt and moved to Israel when he was 12 years old.  He served in the Israeli Defense Force and moved France in 1975 and then to Los Angeles in 1983 where he founded a chain of recording studios.   In case you were a fan of "The Onion", Univision recently (and rather surprisingly) acquired a controlling interest in the online purveyor of satire.  Here's the bottom line on Mr. Saban from Forbes:

Now, let's get to the important matter of Mr. Saban and political influence.  Here is a screen capture from Open Secrets showing how much the Sabans have donated in the 2016 cycle:

They're number 12, they're number 12!

Here is how much money Haim and Cheryl (his spouse) Saban have donated to "outside spending" groups thus far in the 2016 cycle:

This $11.1 million puts them in 11th place overall among all individual donors to outside spending groups (i.e. Super PACs).

A total of $10 million has been donated to Priorities USA Action, a Hillary Clinton-promoting PAC as shown here:

In this case, the Sabans are the largest donors.

The Sabans have also been the biggest donors to Joint Fundraising Committees in this cycle as shown here:

When it comes to donating so-called "hard money" in this cycle, the Sabans find themselves in 27th and 304th places respectively, with Dr./Ms. Saban donating $922,050 and $892,590.  With their combined hard money donations, the Saban family comes in 4th place among all donating families in the United States. 

Not only have the Sabans been busy in this cycle, they came in at number 55 when it came to donations to Super PACs in the 2012 cycle, donating a total of $1,159,373 to the Democratic cause, well behind Sheldon Adelson who donated $91,780,000 to the Republican side of the coin.  As well, in the 2012 cycle, the Sabans came in first place with $1,032,800 donated to Joint Fundraising Committees, those committees that are allowed to take money from doors and split the proceeds between candidates and parties, allowing donors and parties to skirt the donation limits.

Now, in case you didn't think that was enough money spent to get Ms. Clinton into the Oval Office, here is a screen capture from the Clinton Foundation website showing who has donated between $10,000,001 and $25,000,000 to the Clinton family's foundation:

Right there with big players like the Government of Norway (holder of the world's largest sovereign wealth fund), the Kingdom of Saudi Arabia (holder of the world's largest oil reserves) and the Commonwealth of Australia (holder of the most of the worlds kangaroos and koala bears), we find Cheryl and Haim Saban and the Saban Family Foundation who made their rather substantial donation in the third quarter of 2015, just in time for "Hillary's Run For The White House 2016 Edition".  And, once again, just in case you didn't think that the relationship between the Sabans and the Clintons wasn't quite cozy enough, guess who is on the Board of Directors of the Clinton Foundation?  That's right.....

Now, you might ask yourself, what would be a key issue for the Saban family?  Well, here's a hint:

Back in 2002, Haim Saban founded the Center for Middle East Studies at the liberal-leaning Brookings Institute with a mission to "...chart the path—political, economic and social—to a Middle East at peace with itself and the world."  Its annual Saban Forum event, a dialogue between American and Israeli leaders, has hosted many notable officials over the past nine years, including and you probably guessed it, both President William J. Clinton and Secretary of State Hillary Clinton.  In recent months, Mr. Saban has been quoted for his comments on Syrian refugees given to "The Wrap".  Here's the exchange"

"Q: Do you think Hillary Clinton should change her position on allowing more Syrian refugees into the U.S. in the aftermath of the attacks in Paris? 

Saban: I’m not in a position to tell you whether 10,000 or 65,000 or half a million is the right number. I don’t have an opinion on that. But I do have an opinion on the scrutiny. Scrutinize every single individual. There is no data available from Syria. The country is completely in turmoil. It’s all a judgment call of the person conducting the interview. So it’s too dangerous."

He also said that "I’m not suggesting we put Muslims through some kind of a torture room to get them to admit that they are or they’re not terrorists but I am saying we should have more scrutiny.

It kind of makes you wonder what stance the Clinton White House will take on Israel and the Palestinian issue, doesn't it?

Let's close with this photo of the Clintons laughing it up with their benefactor:

American politics at work for you.....or not. 

Wednesday, January 27, 2016

The Debt Trap - This Time It Really Is Different

With the volatility in the world's stock and commodity markets being foremost on many investors minds, I wanted to take a look at some recent comments by William White, a Canadian economist.  His main claim to fame are his prescient views on the debt crisis of 2008.   He is currently the chairman of the Economic and Development Review Committee at the OECD, a position that he was appointed to in 2009.  He was the Head of the Monetary and Economic Department of the Bank for International Settlements from May 1995 to June 2008 and spent 22 years in various positions at the Bank of Canada, rising to the position of Deputy Governor of Canada's central bank.  For those of you who are not aware of the Bank for International Settlements or BIS, it is a Basel-based organization that  was founded in 1930 and is owned by 60 of the world's largest central banks whose home nations make up 95 percent of the world's GDP.  The BIS' mission is to act as a central bank for central banks and it functions under a high level of secrecy.

As far back as 2003, Dr. White observed that there was a real estate bubble developing in the United States, and that there was simply too much cheap money available to consumers.  With the economy bursting at the seams with money "printed" by the Federal Reserve, America's banking system had to find somewhere for all of that money to go, thus, the invention of increasingly imaginative (and ultimately toxic) financial products.  At the time, central bankers universally agreed that if there was no inflation, there was no problem, totally ignoring the development of asset bubbles.  Dr. White suggested that interest rates should be raised even when the economy is in good shape and there is no sign of inflation since this would counteract the formation of asset bubbles and will allow central banks to rearm their monetary policy "tool kits" so that they can lower interest rates when the economy inevitably turns down.  His suggestion would have prevented the Federal Reserve and other central banks from painting themselves into a policy corner as they have now with their prolonged period of near-zero interest rates.

Now, in light of the volatility in the world's markets, let's look at some of Dr. White's more interesting comments from one of his recent speeches.  Here are some excerpts from a speech entitled "False beliefs and unhappy endings" given on December 11, 2015 in Canada.  Any bolds are mine:

"In a nutshell, central bankers in the major advanced economies have been pursuing increasingly risky policies for some time. In large part,this reflects the political reality that monetary policy is the “only game in town”. Yet, in no small measure, it also reflects some long held, but false, beliefs about how the economy actually works. Moreover, absent any discipline imposed by an international monetary system (we have in fact a non-system), virtually every central bank around the world is now engaged in a process of unprecedented monetary easing. As a result, I think the global economy could now be in an even more dangerous situation than it was in 2007...

It is now impossible to deny that something has gone seriously wrong with the global economy. Moreover, for most economists, it seemed to come out of nowhere and its effects have lingered far longer than most originally anticipated.

While recognizing the great contribution of central banks to restoring financial stability, early in the crisis, there are good reasons for doubting that monetary policy will prove effective in stimulating aggregate demand over time. Much of what has been done recently smells of panic. Arguably, by increasing uncertainty, it might even have encouraged people, both companies and households to hunker down and spend less rather than more. What is more certain is that easy money works by bringing spending forward in time. However, by definition, tomorrow eventually becomes today and it is payback time. In short, inciting more spending through taking on higher levels of debt simply cannot go on forever.  And not only has debt accumulation been accelerating for over thirty years, in the advanced market economies, but global debt ratios (non-financial debt) have even risen substantially since 2007...with US interest rates so low and the dollar falling in value (up to mid 2014), much of the borrowing was in US dollars. With the dollar now rising, a mismatch problem could threaten barring an adequate level of prior hedging. Finally, much of the proceeds went into enlarging the capital stock in sectors (like property) where profits are already under strong downward pressure.

As for the unintended consequences, we are observing sharp declines in productivity growth almost everywhere and a slowdown in the formation of new businesses. I think it is not implausible that easy money has encouraged the “evergreening” of zombie companies by zombie banks which has led to this outcome. Moreover, we are all aware of how the prices of almost all assets, financial certainly but also property in many cases, have been bid up to levels where potential future losses might conceivably be severe. Who will suffer and what might be the systemic implications? We simply do not know. Monetary policy has led us into truly uncharted territory. Perhaps when (if?) the Fed starts raising rates, we will get more clarity on these issues, though we might not like what we see.

Finally with respect to unexpected consequences, the health of many financial institutions (especially in the advanced market economies) are also under threat. Bank profits, needed for capital accumulation, are being reduced by low credit spreads and low term spreads. Pension funds and insurance companies, whose liabilities tend to be of longer duration than assets, are similarly threatened and fearful of their longer term solvency. Everywhere, there is the temptation to “gamble for resurrection”, again with unknown consequences.

To boil down Dr. White's comments to one key point, he is concerned about the massive growth in debt, particularly toxic debt, over the last eight years because of near zero interest rates.  Let's look at a few examples:

1.) Here is a graphic from Vox showing how Europe's non-performing loans by country have risen since 2008:

2.) Here is a graphic from McKinsey showing how the global sovereign debt-to-GDP ratio has risen by measuring the change in debt-to-GDP ratio from 2007 to 2014:

The ratio of debt-to-GDP has risen for all advanced economies since 2007 and has fallen or remained steady for only six developing economies.

3.) From Visual Capitalist, here is a graphic showing the percent of total global debt by country, current to August 2015:

While the United States economy makes up 23.3 percent of the world's GDP, it has 29.1 percent of the world's total sovereign debt.  Japan's economy makes up 6.18 percent of the world's GDP but has 19.99 percent of the world's total sovereign debt.

4.) Here is what has happened to non-financial corporate debt levels in the United States since 2007, keeping in mind that a great deal of this debt is considered "junk":

While there was relatively modest corporate debt deleveraging during and immediately after the Great Recession, non-financial corporate debt is now $1.403 trillion or 21 percent higher than it was in the third quarter of 2008.  This is due, in no small part, to ultra-low interest rates on corporate paper.

It has become increasingly apparent that the next recession could well be different.  All levels of the economy have leveraged up as central bankers have prolonged their long-term interest rate experiment.  Governments, businesses and individuals (particularly in nations like Canada) have lined up at the trough, eagerly availing themselves of ultra-cheap credit without thought for the long-term ramifications of their foolishness.  As Dr. White noted so aptly, central bankers have failed to realize that the nature of the global economy is far too complex to be well understood.

Let's close this posting with a recent quote that Dr. White gave to the Telegraph:

"It will become obvious in the next recession that many of these debts will never be serviced or repaid, and this will be uncomfortable for a lot of people who think they own assets that are worth something."