The Willie Sutton theory of fundraising

by Russ Roberts on October 4, 2011

in Financial Markets, Politics

I meant to blog on this months ago, but it really tells you all you need to know about the protests on Wall Street and the reality of politics vs. the illusions many people labor under. From the New York Times back in June:

A few weeks before announcing his re-election campaign, President Obama convened two dozen Wall Street executives, many of them longtime donors, in the White House’s Blue Room.

The guests were asked for their thoughts on how to speed the economic recovery, then the president opened the floor for over an hour on hot issues like hedge fund regulation and the deficit.

Mr. Obama, who enraged many financial industry executives a year and a half ago by labeling them “fat cats” and criticizing their bonuses, followed up the meeting with phone calls to those who could not attend.

The event, organized by the Democratic National Committee, kicked off an aggressive push by Mr. Obama to win back the allegiance of one of his most vital sources of campaign cash — in part by trying to convince Wall Street that his policies, far from undercutting the investor class, have helped bring banks and financial markets back to health.

Last month, Mr. Obama’s campaign manager, Jim Messina, traveled to New York for back-to-back meetings with Wall Street donors, ending at the home of Marc Lasry, a prominent hedge fund manager, to court donors close to Mr. Obama’s onetime rival, Hillary Rodham Clinton. And Mr. Obama will return to New York this month to dine with bankers, hedge fund executives and private equity investors at the Upper East Side restaurant Daniel.

“The first goal was to get recognition that the administration has led the economy from an unimaginably difficult place to where we are today,” said Blair W. Effron, an investment banker closely involved in Mr. Obama’s fund-raising efforts. “Now the second goal is to turn that into support.”

Later on, the article discusses Romney’s ability to raise cash from Wall Street. That apparently continues to be a problem for Obama but it’s really our problem. Politicians go to Wall Street because that’s where the money is. The money is there because politicians help them. Bad symbiotic relationship. It’s the single most important thing that has to be fixed if we’re going to ever try capitalism in this country instead of crony capitalism.

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khodge October 4, 2011 at 11:53 pm

I, for one, am glad “the administration has led the economy from an unimaginably difficult place to where we are today.”

Methinks1776 October 5, 2011 at 12:23 am

Me too. The only thing better than an unimaginably difficult place is a permanent and formerly unimaginable difficult place.

SweetLiberty October 5, 2011 at 9:05 am

Yeah, just because they say it, it must be true!

Greg Webb October 5, 2011 at 12:02 am

Excellent post! It exposes the left’s lies about not supporting their cronies in many Wall Street investment banks and hedge funds.

GiT October 5, 2011 at 12:57 am

Except ‘the left,’ (as opposed to liberals/democrats – and yes, I’m aware about the ‘misappropriation’ of the word liberal) has been criticizing Obama for his ties to Wall Street since his election campaign.

Steve_0 October 5, 2011 at 12:23 am

Meanwhile, in my class today, my students reported on Friedman (on the purpose of business), Friedman (on the Pinto), Bastiat (on the seen and unseen), and Schumpeter (on creative destruction; but they got a bigger kick out of his three goals).

We had an awesome discussion about how these three powerful foundations of business philosophy combine, and talked about several recent news stories that they affect. GM, the Alabama immigration law, replacing a tractor with 100 guys with shovels, 1000 guys with spoons, or 10,000 guys with tweezers. Oh, and the Occupy Wall St. list of demands. I’m happy to report that my usual “deer in the headlights” darlings who have to be prodded to remember what the value of a stock represents, did actually laugh out loud (heartily) at a goodly number of the demands.

And then by the end of class, the iPhone 3Gs was announced as a free product (with contract). It was an awesome day.

Methinks1776 October 5, 2011 at 1:15 am

This is what’s occupying Wall Street.

Stone Glasgow October 5, 2011 at 12:23 pm

Amazing. LOL.

Methinks1776 October 5, 2011 at 1:16 am

More Wall Street occupants.

The funniest thing is that the only things not occupying Wall Street are Wall Street firms, who all moved off Wall Street (mostly to Midtown) ages ago. I think the only bank left is JPM at 60 Wall.

muirgeo October 5, 2011 at 1:57 am

You complain about the system and then ridicule people who have the guts not to simply go along with it and to challenge it.

You complain about the system and then ridicule people who have the guts not to simply go along with it and to challenge it.

You call yourself methinks1776…. the patriots of 1776 were ridiculed and considered terrorist by those in power and those complacent with out solutions like yourself. Those patriots demonstrated and challenged the status quo. You apparently were to chickenshit to try to change your own country but instead you just take advantage of the blood spilled here to make it what it was…. You have nothing over the protesters and I’m guessing this movement will smolder up to the point of significant social change. One thing I think I can say with certainty is that major changes or mayor improvements will occur before our economy ever returns to it’s former efficiency. Those changes will not occur via our normal political process.

The big talk is what I’ve stated here years ago… a need for separation of money and state. If that’s the big goal the protestors are aiming for I support it 100%.

dsylexic October 5, 2011 at 2:17 am

“the big talk is what I’ve stated here years ago… a need for separation of money and state” dont say.really? .libertarians want money and state COMPLETELY DIVORCED with alimony payments even.the govt should have no role in money .
occupy wallstreeters dont care about it. they just want more of the money from the wealthier to be shoved towards them so that the can continue studying and teaching gender and gerund studies

dsylexic October 5, 2011 at 2:18 am

without alimony* damn edit button -NOT

Methinks1776 October 5, 2011 at 4:37 am

You’re talking to a fool who feels he’s one with “Lotion Man”. Do you really think after 6 years of trolling here he’ll suddenly start comprehending what you write?

Emil October 5, 2011 at 4:35 am

so am I getting this right, you are really claiming that wanting to have “the right to a living wage”, higher subsidies, tariffs on imported goods, and higher taxes is a scream for a separation of money and state… the logical leap in that statement is really remarkable

Anotherphil October 5, 2011 at 8:29 am

Visceral indignation based on emotion (envy) is the binding principle of a “movement”, unless that movement is to be-well of the kind that requires one to place their backside on porcelain every day or so.

“Occupy Wall Street”, is a contrived invention of the left. Its the Johnny Come lately the tea party for the indolent, ignorant and destructive.

Anotherphil October 5, 2011 at 8:30 am


(envy) ISN’T the

Jay October 5, 2011 at 7:21 pm

You are going to have to dismantle Social Security, Department of Education, FDA, etc to get the “separation of money and state”.

Mark October 5, 2011 at 3:06 pm

Steve_O, Do you have a list of the protestors’ demands, or maybe a link to them? I heard a few on the news and it made for some great comedy.

Steve_0 October 5, 2011 at 10:04 pm
Rob October 5, 2011 at 12:28 am

I could not agree more nor could I be more pessimistic that this will ever happen. Any movement will either be labeled class warfare (by the right) or seen as an attempt to help the rich at the expense of the rest (by the left). Mr. Webb could not have missed the point more by singling out the left. The right is just as duplicitous!

This brings us back to the major problem….Americans love government spending and will not easily part ways with it. Only by removing government’s ability to distribute money can we break the link Russ is talking about. Sadly, cynical politicians learned long ago, in order to preserve the system, you have to throw a few bones to the masses (social spending) in order to perpetuate the real money making machine (crony capitalism).

Scott G October 5, 2011 at 12:57 am

“It’s the single most important thing that has to be fixed if we’re going to ever try capitalism in this country instead of crony capitalism.” Great post, especially this last sentence.

How much more influential money is there in Wall Street than in other places like teacher’s unions or Big Oil?

GiT October 5, 2011 at 1:23 am

Well, as an example:

Total spent on lobbying, 1998-2011:

US Chamber of Commerce: 770 million

Closest Oil Company (1998-2011):

Exxon Mobil: 163 million

Largest Union (1989-2011) :AFSCME (public employees union): 45 million

Teachers (1989-2011)

AFT: 31 million

You can browse for yourself here. It’s a very nice website.

In any case, it doesn’t take very long to figure out which way the cronyism leans in the US. .

I find the revolving door info is especially interesting.

( 0.6% of positions are involved with labor. 11.6% with finance/investment/real estate. Energy doesn’t do so bad at 9.1%, but the real winner is health at 11.8%)

kyle8 October 5, 2011 at 6:54 am

The only way to lessen the influence of lobbyists is to lessen the power that government has to interfere with markets.

I am sure that Exxon would love to keep it’s 173 million for it’s own profits but as long as they know that an administration can literally destroy their company on a whim, then they must try to influence things as much as possible.

What I am saying is that not all corporate lobbying is for rent seeking, some of it is just out of fear.

Methinks1776 October 5, 2011 at 8:08 am

That’s very very true. Also, a lot of the rents sought are to compensate for the damage done by legislation and regulation.

For instance, a tax break is lobbied for to offset the cost of new regulation.

The net result is more distortion and less healthy markets.

Steve_0 October 7, 2011 at 1:40 am

Tullock lottery.

dsylexic October 5, 2011 at 8:37 am is the govt that is doing the rent seeking most of the times.

GiT October 5, 2011 at 1:29 pm

That’s absurd.

‘When those things I like lobby, it’s out of fear.’

‘When those things I don’t like lobby, it’s out of rent seeking.’

Please, spare me the religious dogmas.

Methinks1776 October 7, 2011 at 1:49 am

That’s not what he said. The same entity can do both. Sometimes for one reason, sometimes for the other.

Please, spare us the straw man.

BTW, did you mean to call yourself a git?

vikingvista October 5, 2011 at 1:54 pm

“It’s the single most important thing that has to be fixed if we’re going to ever try capitalism in this country instead of crony capitalism.”

Cronyism is integral and proportionate to government power. How do you envision the latter getting reduced? What are the incentives that will cause the decision-makers to strip themselves of power?

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