One of my favorite phrases from Ayn Rand's Atlas Shrugged is "The Aristocracy of Pull." It was a phrase used by Dagny Taggart to describe what the world had become - where business and its leaders advanced not through merit or providing value to their customers, but by their political connections. Those without connections (or who refused to call in their favors) simply couldn't compete. And while those who made the back room deals thought they were setting themselves up for the future, in reality they were just delaying the inevitable decline - since there will always be someone else with greater influence who can undermine you with a sweeter deal.
I've had increasing opportunity to use it over the past year and it would seem that I'll continue to use the phrase for quite some time. This story in the New York Times only proves the point:
November 12, 2008When free money is available and when the gravy train gets started, everyone lines up at the station.
Lobbyists Swarm the Treasury for Piece of Bailout Pie
By MARK LANDLER and DAVID D. KIRKPATRICK
WASHINGTON — When the government said it would spend $700 billion to rescue the nation’s financial industry, it seemed to be an ocean of money. But after one of the biggest lobbying free-for-alls in memory, it suddenly looks like a dwindling pool.
Many new supplicants are lining up for an infusion of capital as billions of dollars are channeled to other beneficiaries like the American International Group, and possibly soon American Express.
Of the initial $350 billion that Congress freed up [...] the Treasury Department has committed all but $60 billion. The shrinking pie — and the growing uncertainty over who qualifies — has thrown Washington’s legal and lobbying establishment into a mad scramble.
This is news?!?
The Treasury Department is under siege by an army of hired guns for banks, savings and loan associations and insurers — [...]It would seem that the "pull" of community banks and their lobbyists in the ABA isn't as great as the "pull" of AIG, AmEx, GM, Ford, Chrysler, et al. Get in the back of the line!!!
The lobbying frenzy worries many traditional bankers — the original targets of the rescue program — who fear that it could blur, or even undermine, the government’s effort to stabilize the financial system after its worst crisis since the 1930s.
“By the time they get to the community banks, there may not be enough money left,” said Edward L. Yingling, the president of the American Bankers Association. “The marketplace is looking at this so rapidly that those who have the money first may have some advantage.”
[...]So, the bailout may now be going to support pleasure boat dealers?!?!?!
Meanwhile, the list of candidates for a piece of the bailout keeps growing.
On Monday, the Treasury announced it would inject an additional $40 billion into A.I.G., amid signs that the government’s original bailout plan was putting too much strain on the company. American Express won approval Monday to transform itself into a bank holding company, making the giant marketer of credit cards eligible for an infusion.
Then there is the National Marine Manufacturers Association, which is asking whether boat financing companies might be eligible for aid to ensure that dealers have access to credit to stock their showrooms with boats — costs have gone up as the credit markets have calcified. Using much the same rationale, the National Automobile Dealers Association is pleading that car dealers get consideration, too.
Perhaps they didn't get the memo, but it's unlikely that people will be spending a boatload (pun intended) on luxury items like pleasure boats, yachts, etc.
“Unfortunately, I don’t have a lot of good news for them individually,” said Jeb Mason, who as the Treasury’s liaison to the business community is the first port-of-call for lobbyists. “The government shouldn’t be in the business of picking winners and losers among industries.”I'm sure Mr. Mason's replacement (hand-picked by Barry, no doubt) will be able to provide some good news for everyone.
Mr. Mason, 32, a lanky Texan in black cowboy boots who once worked in the White House for Karl Rove, shook his head over the dozens of phone calls and e-mail messages he gets every week. “I was telling a friend, ‘this must have been how the Politburo felt,’ ” he said.First, it's critical that Mason used to work for Rove... wouldn't want to leave that important tidbit out. (It's hilarious to see ARC's 1st Law at work in the MSM.)
Second, yes... this is exactly how a politburo apparatchik would've felt. Welcome to the United Socialist States of America, komrade! Where is the line for toilet paper again?
[...] Under the terms of the $250 billion capital purchase program announced last month, cash infusions are available to “qualifying U.S. banks, savings associations, and certain bank and savings and loan holding companies, engaged only in financial activities.”Urgent Memo: Would you like billions in free government money? Contact your representative at Patton Boggs immediately. For a small lobbying fee, you too could benefit from this important government program, regardless of need!!
That definition has grown to include private banks and insurers like Allstate and MetLife, which own savings and loans. It may also encompass industrial lenders like GE Capital and GMAC, the financing arm of General Motors, provided they win approval to reclassify themselves as a bank or savings and loan holding company.
Law and lobbying firms that specialize in government contracting fired off dispatches to clients and potential clients explaining opportunities in the new program. Capitalizing on the surge of interest, several large firms, including Patton Boggs; Akin Gump; P & L Gates; Fried, Frank, Harris, Shriver & Jacobson; and Alston & Bird, have set up financial rescue shops.
Alston & Bird, for example, highlights its two biggest stars — former Senator Bob Dole and former Senator Tom Daschle. Mr. Dole “knows Hank Paulson very well” and has been “very helpful” with the financial rescue groups, said David E. Brown, an Alston & Bird partner involved in its effort.
“And of course, Senator Daschle is national co-chair of the Obama campaign,” Mr. Brown added, noting that because Mr. Daschle is not a registered lobbyist, his involvement is limited to “high level advisory and strategic advice.”
Not that there's any real difference between lobbying and high level advisory & strategic advice (aka back channel communications), but we have to say that, okay?
Ambac Financial Group [...] never needed lobbyists before, said Diana Adams, a managing director. But its clients persuaded the company to hire two Washington veterans — Edward Kutler and John T. O’Rourke — who helped arrange a recent meeting with Phillip L. Swagel, an assistant Treasury secretary. “We haven’t really asked for much in the past,” Ms. Adams said.Well, Ms. Adams - Time to get your lobbying team staffed, because it will become the most strategic asset for your company over the next four years.
Initially, the banks reacted coolly to the prospect of the government taking direct stakes in them.If your competitors are getting free money, you pretty quickly realize that you'd better get your slice of the pie before you find yourself out of business.
“The biggest surprise was how quickly it went from ‘I don’t need this,’ to ‘How do I get in?’ ” said Michele A. Davis, the head of public affairs at the Treasury, who is Mr. Mason’s boss.
Underscoring the many ways companies can take part in the rescue fund, the Hispanic Chamber of Commerce and other Hispanic business groups met with Mr. Paulson to push for minority contracts in asset management, legal, accounting, mortgage services and maintenance jobs, like plumbing and masonry.Ah, yes... we must not leave out the other, tangential stakeholders who will all use their influence to get their little payout.
As the automakers have pushed for federal help, the trade groups for car dealerships and even boat dealerships are pressing their own cases. They argue that showrooms are feeling a squeeze between higher borrowing costs to finance their inventory and slowing consumer sales to move it out the door.
“We have been encouraged by reports that Secretary Paulson is looking to broaden the program,” said Mathew Dunn, head of government relations for the National Marine Manufacturers Association.
Translation: We've been lobbying hard and want to put a good spin on our conversations with Hank, just in case he's still on the fence. Pull and influence is so hard to gauge, you know?
Actually, I would argue that the dealer network is an outdated relic that impairs the ability of automakers to directly control the quality of the distribution chain of their products. Compare the way people feel about going to a Best Buy to buy a flat panel TV for several thousand vs. going to a car dealership. I don't think the car dealers will get too many positive ratings.
On Friday, the automobile dealers sent Mr. Paulson a letter urging him to keep them in mind.
“A well-capitalized, financially sound dealer network is essential to the success of every automobile manufacturer,” wrote Annette Sykora, a car dealer in Slaton, Tex., and the chairwoman of the National Automobile Dealers Association. “Any government intervention should include provisions to preserve the viability of dealers.”
But, we fear change, so the dealer network continues - and may soon be subsidized by the US taxpayer.
In other news, Best Buy, TJ Maxx, and Macy's are all future prospects for a government bailout.
Because no one - absolutely no one - should suffer in these economic times. (Unless you're a current or future taxpayer, of course.)
Yet more evidence of the Aristocracy of Pull (H/T Instapundit).
A car czar... just what we need! I just hope he has a Russian, Eastern European, or German accent... might as well get the full effect, right???
ARC: St Wendeler