(Corporate) Waste Not, Want Not

Corporate Campaign Contributions

In Citizens United v. Federal Election Commission, the Supreme Court decided that corporations could spend as much as they wished at any time, assuming there was no direct coordination with the candidate. In doing so, the court overturned its own precedents and refused to distinguish the free speech rights of corporations and unions in any way from those of actual people.

The problem with this logic is that corporations have a legal duty not to spend money unless it is likely to improve profits. Unions, too, are expected to make only contributions that will benefit members.

--Scott Turow, "Blagojevich and Legal Bribery"; The New York Times (8/18/2010)

Turow provides the ultimate rebuttal to those who would argue that allowing corporations to spend unlimited amounts on campaign contributions -- now the law of the land -- has no corrupting effect on democracy.

The argument is based on a legal term called "corporate waste."

Just as former attorney Turow notes -- there are a lot of us former attorneys out there -- corporate waste forbades companies from spending money on anything that doesn't further their profit-seeking agenda (sidebar: profits are good -- it's when they come from political suasion that they become bad).

No shareholder, to my knowledge, has ever brought suit against a company arguing that its campaign contributions were frivolously spent.

Ergo, campaign contributions are money well-spent.

Return on Investment

How well?

Staggeringly well.

To pick just one example, the $500 million or so that big Wall Street firms have given both parties the last decade or so loosened something like $2 trillion in U.S. aid and financial subsidies, both direct and indirect (TARP, ZIRP, guaranteed loans, AIG-style infusions, etc.).

And that's just since 2008!

If you do the math, that's a 40,000% return on investment.

Makes you wonder what business Wall Street's really in . . . .

P.S.: Did you know that, according to the Supreme Court, companies like Goldman Sachs, AIG, and BP are "legal persons" just like you or me?

Funny, I don't recall ever attending a wedding, going to a funeral, or having a farewell office party for someone named "Goldman Sachs."

Time to Get Off the Stimulus/Incentives Roller Coaster?

"Deja Vu All Over Again?"*

The number of buyers who signed contracts to purchase homes dropped in May to the lowest level on record, a sign the housing recovery can’t survive without government incentives.

The National Association of Realtors said Thursday that its seasonally adjusted index of sales agreements for previously occupied homes tumbled 30 percent in May. The index fell to 77.6 in May from 110.9 in April. May’s reading was the lowest dating back to 2001.

--"U.S. Pending Home Sales Fell to a New Low in May"; The New York Times (7/1/2010)

The above is hardly a shock to any Realtor doing business the last two months; showings, Pending sales, and virtually all other real estate activity are down markedly since the last batch of tax credits expired April 30.

So now what?

Diminishing Returns

Personally, I think it's time to change course.

Instead of another batch of incentives, which create another burst of buying (although less than last time, which in turn was less than the time before), how about doing what should have been done two years ago:

--Reform Wall Street, and specifically dismantle the mega-banks that are too big to fail.
--Charge Wall Street's leadership with the criminal activity it clearly committed, and put a couple dozen people in prison (while we're at it, confiscate their ill-gotten gains, and apply it to the exploding deficit that the bailouts exacerbated).
--Strip corporations of their status as "legal persons," which a supine Supreme Court has (incredibly) conferred upon them, and which allows for -- amongst other things -- unlimited campaign contributions.

That's what previous generations would have done -- and in fact, did -- when confronted with unbridled greed and systemic corruption.

Do all that, and just watch what happens to consumer confidence, people's faith in the system generally, and their sense that someone guarding their interests is really in charge.

Do all that . . . and home sales will take care of themselves . . .

*Courtesy of Yogi Berra