Tainted love

Politics | Is Wall Street money for the presidential inauguration a gift or an investment?

Issue: "Schock factor," Jan. 31, 2009

You might call it an emergency when between 1.5 million and 3 million people are expected to descend upon a city. President Bush did last week when he took the unusual step of declaring Washington, D.C., an emergency area before the Jan. 20 inauguration of new president Barack Obama, allowing the city to access federal funds to deal with the influx of visitors. Police from as far away as Los Angeles were expected to arrive and help with security.

But the cost to taxpayers isn't what's causing critics to sound the loudest alarm bells. Their larger concern: the sources of the tens of millions of private dollars that the Obama inaugural committee raised for the event.

Private funding for lavish presidential inaugurations isn't new; President Bush raised about $40 million for his 2005 event, and 90 percent of that came from corporations. But in the era of multi-billion-dollar corporate bailouts, questions about who is giving, why they are giving, and what they may expect in return have become more serious.

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Public Citizen, a liberal watchdog group, maintained a list of donors to the event as the big day approached, and many of the names looked familiar from the recent bailouts. As of Jan. 14, 211 "bundlers" had raised $27.6 million, including Louis Susman of Citigroup (who raised $300,000), Mark Gilbert of Lehman Brothers ($185,000), Jennifer Scully of Goldman Sachs ($100,000), and Bruce Heyman, also of Goldman Sachs ($50,000).

President-elect Obama put some controls in place: He limited contributions to $50,000 from individuals and $300,000 from bundlers (those who raise money from colleagues and others). He also banned contributions from corporations, lobbyists, PACs, and unions. But executives from companies could give and raise funds, and many who have benefited from recent government largesse did so.

The timing of Susman's maxed-out contribution looked particularly bad. As preparations for the inauguration proceeded last week, Citigroup shares were falling sharply on news that the firm may have to ask for more bailout money; Citigroup has already received $45 billion from taxpayers. "Citi's got their hand out from now 'til the end of time," Peter Kenny, a managing director at Knight Equity Markets, told the Bloomberg News Service.

That Citigroup and others may now receive undue influence in shaping policy is what concerns government watchdogs. There's a potential conflict, says Public Citizen's Alexander Cohen, between "what they want and the public interest." Cohen praises the Obama team for its efforts at upfront disclosure but says "a public event to showcase American Democracy" should be paid for with public funds: "Taxpayer funding would eliminate the conflict of interest."

Concerns weren't limited to the left. Conservatives have long worried that bailout money would become a stick to force companies into line on legislative matters and funding for incumbent campaigns. A Wall Street Journal editorial last week noted that after receiving its billions from Washington, Citigroup suddenly reversed its opposition to a Senate proposal that would allow judges to break mortgage contracts during chapter 13 bankruptcy proceedings: ". . . [I]t's really hard to say no when those Washington 'investors' call for a favor." It also may be hard to say no when they call for a contribution.

As Wall Street gives millions to Washington and Washington gives trillions to Wall Street, analysts on both the left and right are noticing not only strings that may be attached but heavy ropes.

-with reporting by Emily Belz in Washington, D.C.

Timothy Lamer
Timothy Lamer

Tim is editor of WORLD Magazine.


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