Target Rich Environment: Hauls from legislative halls

“The mere proposal to set the politician to watch the capitalist has been disturbed by the rather disconcerting discovery that they are both the same man. We are past the point where being a capitalist is the only way of becoming a politician, and we are dangerously near the point where being a politician is much the quickest way of becoming a capitalist.”— G.K. Chesterton.

We’ve moved well past the second point Chesterton foresaw during the seventy years since he wrote those words. The evidence of this appears in a recent book by Peter Schweizer entitled Throw Them All Out: How Politicians and Their Friends Get Rich Off Insider Stock Tips, Land Deals, and Cronyism That Would Sent The Rest Of Us To Jail.

Throw Them All Out is about Washington politicians but Marion B. Tasco, “one of Philadelphia’s most influential, politically savvy, and pro-active public officials” gives us an example how a politician-capitalist at a humbler level may also derive private profit from public service. Last month Marion “retired” from her sixth term as councilwoman last month, collected a $478,057 pension, and began collecting her salary for a seventh term

Marion saw the opportunity presented by Philadelphia’s Deferred Retirement Option Plan (DROP) and she took it. DROP allows city workers to collect salary and build up pension money during the last four years of their employment. Mayor Nutter, facing a budget crisis and $22 million in DROP costs, has called for its repeal. A 2010 Boston College study shows it has cost the city $258 million over the previous decade. Repeal is up to the city council. Many councilmen have signed up for the program. They are thinking about it. Thinking hard.

Marion Tasco, operating entirely within the law, is the beneficiary of “honest graft.” It’s been nearly a century since State Senator G.W. Plunkitt, a forty-year veteran of New York’s Tammany Hall Democratic machine, defined honest graft about a century ago. Speaking to a newspaper reporter from his customary perch on the New York County Court House bootblack stand, he explained it this way: “My party’s in power in the city and it’s goin’ to undertake a lot of public improvements. Well, I’m tipped off, say, that they’re goin’ to lay down a new park at a certain place. I go to that place and I buy up all the land I can in the neighborhood. Then the board of this or that makes the plan public, and there’s a rush to buy up my land, which nobody cared particular for before.”

“Ain’t it perfectly honest to charge a good price and make a profit on my investment and foresight? Of course it is. Well that’s honest graft….It’s just like lookin’ ahead in Wall Street…It’s honest graft and I’m lookin’ for it every day in the year….I’ve got a good lot of it too.”

“If my worst enemy was given the job of writin’ my epitaph when I’m gone he couldn’t do more than write. “George Washington Plunkitt. He seen his opportunities and he took ‘em.”

George retired rich and free, unlike Rep. “Duke” Cunningham, a California Republican now taking a hundred-month sabbatical in federal prison. Duke sold his vote on a $2.4 million defense appropriation. This is an example of “dishonest graft,” which is highly illegal.

Schwetzer’s book is concerned exclusively with honest graft. Highschool wrestling coaches reading the volume can discover how to accumulate an $11 million fortune. They can follow the trail blazed by Denny Hastert. First, you get elected to Congress, then work your way up to become Speaker. This allows you to steer a road-building ear-mark to a location two and a half miles from where you bought a nice parcel of land available for development. Sell it at a hefty profit and you are on your way. George Plunkitt would have been impressed.

Nowadays the Wolves of Wall Street find the profits of “lookin’ ahead” less accessible owing to laws against insider trading. Happily there are no impediments to our congresscarnivores earning honest graft by insider trading. What else should we call it when we read that Sen. John Kerry invested $200,000 in the healthcare company ResMed during the 2009 health care debate while dumping his shares in United Health. ResMed stock shot up 70% and United Health dropped sharply. He seen his opportunities and took ‘em.

Senators Johnny Isaakson (R-GA) and Sheldon Whitehouse (D-Rhode Island) also foresaw what would happen to their health industry stocks if the bill passed and dumped them in good time.Current Speaker John Boehner waited until the debate was over to purchase stock in several health-related companies.

No less foresighted, Sen Dick Durbin unloaded large chunks of his stock holdings after attending the September 2008 meetings in which Henry Paulson and Ben Bernanke warned members of Congress of imminent and universal financial collapse.

Do you suppose that the beautifully coiffed and botoxed Nancy Pelosi got to the head of the line on the Visa IPO because of her bright smile and famous charm alone? That may have had something to do with it, but I’m guessing her power as Speaker of the House figured in her financial coup.Visa had been privately held by a group of banks up to 2008, and when they decided to make a public sale of stocks, it was so avidly sought after that one financial advisor described it as “the IPO of the year.” Demand was so high that only hand-picked investors were given the opportunity to buy at the initial price of $44.00 per share. Somehow, some one picked Mr. and Mrs. Pelosi for this privilege. They paid millions at that price and realized a 50% profit in two days. Senators Jeff Bingaman, Barbara Boxer and Robert Torricelli (nine IPO stock purchases in 1997 alone) have also done well by getting to the head of the IPO line.

And so it goes, and so it promises to continue. Schweizer’s volume is in the bookstores even as I write. See for yourself.

Readers will be glad to know that Maine’s congressional delegation does not appear in the book., Senator Collins reports a paltry $350,000 of net worth, 97th in rank among the senators. She made no financial transactions at all in 2010, leaving her modest investments untouched.

Mike Michaud’s net worth of $275,000 is larger than most fork-lift jockeys can acquire, but there’s nothing fishy about his report that I can see. His largest investments are in two East Millinocket Homes and something called M&M Partnership, evaluated at $100,000 in each case. He made only three modest investments in 2010.

Before an advantageous marriage decision placed her in the ranks of the rapacious One-Percenters, Chellie Pingree claimed a net worth of $1,000,000 for her Nebo Lodge in North Haven. People who get riled by the very word “corporation” might note that Nebo Lodge is incorporated. S. Donald Sussman is also alive to the tax advantages accruing to corporations, which is why his corporate jet and home on Munjoy Hill in Portland are corporate, not personal, possessions.

Senator Snowe ranks as 15th in the Senate with 39 assets totaling $29,270,000. Her husband’s firm, Education Management, figures largely in this equation ($10,000,000) and her primary opponent Scott D’Amboise has tried to make an issue of the connection without much result. It’s true that federal money figures largely in all educational enterprises, but it would take a microscopic examination of her votes to identify what, if any, personal benefits may have spilled over from them.

What’s interesting is the senator’s assets in tax-free investments: Federated Tax Free Obligation Fund ($6,500,000), Maine Governmental Facilities Authority Bonds ($250,000), Maine Health & Higher Education Bonds ($250,000), Federated Tax Free Obligation Fund $6,500,000), Maine Municipal Bond Bank Bonds ($750,000), Maine State Housing Authority Meeting Power ($250,000), Ohio G/O Weekly Put Municipal Bond ($250,000), and the University of Maine System Rev MBIA Bonds ($500,000).

I conclude that she is sincere about wanting to increase taxes on the rich and sincere about wishing to minimize the costs to herself of such an increase.

A December 27 article in the Washington Post,“Growing Wealth Widens Distance Between Lawmakers and Constituents,” provides some implicit support for Schweitzer’s criticisms. It tells us that the median worth of a member of the House has risen 2.5 times between 1984 and 2009, rising from $280,000 to $725,000, adjusted for inflation.. Their official salaries during this period have risen from $72,600 in 1984 to $174,000 in 2009-2011. Adjusting for inflation $72,600 in 1984 equates to $150,347.18 in 2010. The wealth of the average American family declined slightly during that same period.

It’s only fair to mention that twenty-five Capitol Hill inmates have a negative net worth. The poorest among them is Rep. Alcee Hastings (D-Fla) who had a net worth of minus $4,732,002 in 2010. Alcee has had some hefty legal expenses defending himself against 1981 charges that he accepted a $150,000 bribe as a judge, and then appealing his subsequent impeachment. He is now dealing with sexual harassment charges. That sort of thing costs money.

Rep. Ruben Hinojosa (D-Tex.) Is the second poorest, with an average net worth of minus $2,500,488 in 2010. This is the result of guaranteeing a bank loan to H & H Meat Products, a family company he once directed. That strikes me, on the face of it, as a righteous and honorable act. Rep. Hinojosa has declared bankruptcy.