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Crony Capitalism 101: Want To Avoid The SEC? Bribe Your Friendly, Neighborhood Politician

Tyler Durden's picture




 

Forget conjecture - Crony Capitalism is alive and well at The SEC and a new study proves it statistically. As The LA Times reports (via IBT), Maria Correia's research finds that - perhaps not surprisingly - the more a company spends on political donations, the more lenient the treatment it gets from the SEC. For all the cheaters out there, the math is clear - a $1-million contribution to a political action committee can reduce the probability of an enforcement action from the SEC by more than half (from 8.58% to 3.43%).

 

As The LA Times reports, the working assumption of business executives and ordinary taxpayers alike is that political donations can buy big favors from Congress... now that has been quantified statistically...

The value of political grease... A $1-million increase in contributions by a corporation to a political action committee in the five years before a violation of SEC rules, she finds, can reduce the probability of an enforcement action from the SEC by more than half (from 8.58% to 3.43% in her sample). Her conclusion is that "long-term PAC contributions are effective at deterring SEC enforcement."

 

Furthermore, she finds that higher PAC contributions are associated with lower enforcement penalties and a lower chance that the SEC will cite officers or directors. An increase of $100,000 in PAC money in the five pre-violation years is linked to an 11% decrease in monetary penalties and a 12.9% decrease in the probability that the SEC will bar an officer or director from the business.

 

...

 

As for where companies should put their money to get the biggest bang for the buck, Correia says contributions to "high ranking politicians from the majority party" and to those "sitting on committees involved in setting the SEC's budget or overseeing the agency" have the greatest effect.

As Naked Capitalism's Yves Smith notes, the consequence is not trivial...

"The SEC, which was once a feared and respected agency, has become the least effective financial regulator."

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Full research here (PDF).

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And the complete Banker's Decision Tree...

 

h/t @RudyHavenstein

 

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Wed, 08/13/2014 - 20:32 | 5090095 logicalman
logicalman's picture

We've known it for a long time.

Nice to see math being used in such a useful manner!

Wed, 08/13/2014 - 20:37 | 5090114 Greenskeeper_Carl
Greenskeeper_Carl's picture

So it works exactly like the Israeli lobby? Got it.

Wed, 08/13/2014 - 20:43 | 5090127 Publicus
Publicus's picture

When you legalize curruption, you are no longer a currupt country and can call yourself an advanced country.

Wed, 08/13/2014 - 21:11 | 5090221 wee-weed up
wee-weed up's picture

Jon Corzine approves of this article.

Wed, 08/13/2014 - 21:28 | 5090276 chunga
chunga's picture

There's a zillion comments over on the Ferguson article. This one here I bet not so much because everybody already know SEC cronies completely suck. Besides, what can a regular person do about it anyway, complain? It would be great to see angry mobs looting the SEC people. Now that would be something and they'd deserve every damn bit of it.

Thu, 08/14/2014 - 03:41 | 5091131 AldousHuxley
AldousHuxley's picture

Jon Corzine to host Ready for Hillary fundraiser

Wed, 08/13/2014 - 21:27 | 5090275 BobPaulson
BobPaulson's picture

Yes. And when you ban normal behaviour which most other people do and employ massive surveillance systems to watch everybody, it allows you to arrest, shoot or torture any of the trouble makers without the police being encumbered by pesky rules and stuff.

Wed, 08/13/2014 - 21:17 | 5090247 booboo
booboo's picture

At least in a third world country you can bribe a local official with some pocket money in order to facilitate your business concerns. With America they still want to shake you down at the federal level at seven figures.

Wed, 08/13/2014 - 22:00 | 5090411 doctor10
doctor10's picture

Its the whole federal apparatus-it happens to be ubergross at the SEC tho

Wed, 08/13/2014 - 20:33 | 5090098 Notsobadwlad
Notsobadwlad's picture

The "Den of Vipers" that Andrew Jackson spoke of has grown 100-fold or maybe 1000-fold since hi time. Andrew Jackson had to root out 2000 traitors, whose first alleguance was to the bank.

Wed, 08/13/2014 - 23:01 | 5090316 resaci
resaci's picture

Imagine a totally co-opted political bureaucracy. Lobbyist spewing corporations have their way, for tens of decades. The Dollar under the FED’s stranglehold, reduced to pennies. Some have taken advantage of the moral vacuum of the last century in corporate and government power structures. They are Now erecting a multitude of laws to strip individual human beings of the Liberties we have enjoyed for the last few centuries in this constitutional republic. Soon the corporations will push the individual aside in a landslide of derivatives and debt. This will close the curtain on the status quo.   Individual human Liberty will be dead. Those who love Liberty will be blamed. 

Thu, 08/14/2014 - 01:46 | 5090964 zhandax
zhandax's picture

I don't have to 'imagine' shit.  It's reported here everyday.

Wed, 08/13/2014 - 20:33 | 5090101 Goldilocks
Goldilocks's picture

Altan - Tommy Bhetty's Waltz
http://www.youtube.com/watch?v=BXO3PZqda14 (5:00)

Wed, 08/13/2014 - 20:39 | 5090118 Bangin7GramRocks
Bangin7GramRocks's picture

American politics. Best investment in the world! Exceptional my ass!

Wed, 08/13/2014 - 20:43 | 5090129 Cognitive Dissonance
Cognitive Dissonance's picture

"As Naked Capitalism's Yves Smith notes, the consequence is not trivial..." "The SEC, which was once a feared and respected agency, has become the least effective financial regulator."

Ummmm, as the former owner of a one man independent brokerage firm I can say without qualification that this statement is false. They were and are very effective against those who cannot fight back or pay them off.

Wed, 08/13/2014 - 20:58 | 5090183 Lumberjack
Lumberjack's picture

I just found out that the OIG is just as bad.

Wed, 08/13/2014 - 21:18 | 5090254 booboo
booboo's picture

You got that right.

Wed, 08/13/2014 - 22:02 | 5090420 teslaberry
teslaberry's picture

just about everything on naked capitlism is false. 

 

it is dissonance for the non-critical thinker who wants half bullshit criticism half assed implicit apologism spoon fed to them.

it is liek the serious news version of the daily show with john stewart, bill maher and the other political comedian pseudo-crtiics.. yves is worthless because it's NOT EVEN FUNNY. 

Wed, 08/13/2014 - 22:26 | 5090511 Fidel Sarcastro
Fidel Sarcastro's picture

C.Dis... u got that right!

Wed, 08/13/2014 - 22:52 | 5090596 jballz
jballz's picture

That's because sometimes they get asked what the fuck they are doing all the time since no wall streeters ever get strung up. To which they can proudly responds they brought 42.700 actions in the last 3 years.

Against guys like you, for having your file cabinet to close to water heater or forgetting to capitalize your Llc on your business cards or random meaningless shit.

Rejoice, if not for you the whole shit stack might get pulled down.

Wed, 08/13/2014 - 22:53 | 5090599 Burticus
Burticus's picture

I've experienced the same thing C.D.  A couple years ago, my firm had to dump the broker-dealer client we had for 29 years, just to avoid registering with the PCAOB after the SEC changed their rules.

These "folks" were honest-Injun, very well capitalized and the custody of their customers' assets was handled through a big clearing broker.

I contacted CEO recently and he told me that FINRA harrassed them relentlessly every year so badly that they finally gave up and merged with a larger firm.

Wed, 08/13/2014 - 20:50 | 5090157 Bangin7GramRocks
Bangin7GramRocks's picture

You didn't steal enough to grease the wheels. Remember that for next time. It never pays to be a little crooked. 

Wed, 08/13/2014 - 20:53 | 5090167 Rootin' for Putin
Rootin' for Putin's picture

What about Brony Capitalism?

Wed, 08/13/2014 - 21:10 | 5090218 J J Pettigrew
J J Pettigrew's picture

The SEC whistle blower who emerged during the Madoff incident hit it right on the head...

 

THe SEC is filled with those hoping to land a big job at a wall street firm.  To "catch" a wall street firm doing something wrong is to ruin your chances at that big job....right Chris Cox?

Wed, 08/13/2014 - 22:05 | 5090426 doctor10
doctor10's picture

"To "catch" a wall street firm doing something wrong is to ruin your chances at that big job....right Chris Cox?"

I would say if you were to play it right -such a catch could be worth a lifetime of privelege!!!And probably is for many former FederalCrats!!!

Wed, 08/13/2014 - 21:28 | 5090278 Reaper
Reaper's picture

Be aware that Chuck Schumer controls all appointments to the federal bench at appellate and district level in the second circuit. Chuck's former lawyer, Bharra, is the US Attorney for the Southern District of NY(Manhattan) and has de facto TBTP policies, in line with, of course, Eric Holder's. http://www.senseoncents.com/2012/07/preet-bharara-on-too-big-to-prosecute/

Obama's last two Supreme Court choices were from Schumer's second circuit. Schumer used his collected riches from Manhattan/Southern district law/financial firms to fund other Democrat Senators. Venality is a Schumer requirement for judges that can be controlled.

Wed, 08/13/2014 - 22:47 | 5090579 kchrisc
kchrisc's picture

Chuckie is also from Dual.

Wed, 08/13/2014 - 21:29 | 5090282 Chippewa Partners
Chippewa Partners's picture

Madoff turned himself in, they didn't catch him.  Arthur Levitt had a great track record at the SEC besides Madoff.  He had exemptions for ENRON, no need to expense stock options and typical double talking paid from both the .gov and the corporate side.   He loved HFT with it's quote stuffing, flash trading, layering, latecy and dark pool arbitrage, NBBO and Reg NMS exemptions and co-location.

Wed, 08/13/2014 - 21:51 | 5090362 robnume
robnume's picture

The "Broker Defense" ad at the end of this article says it all...Kill the Giant Octopus!!

Wed, 08/13/2014 - 21:57 | 5090393 ToNYC
ToNYC's picture

All Politics is Local.

Wed, 08/13/2014 - 23:17 | 5090662 Burticus
Burticus's picture

Not any more, pal!  Why do you think CONgressional approval is in the single digits, yet 98% of them get re-re-re-elected?

Try checking out their campaign finance records.  You will see blocks of maximum bribes, er, contributions from the same P.O. box on the same day, from XYZ Inc., XYZ Corp, XYZ LLC, XYZ Management, etc.

The erections officials look the other way because all of their bosses, elephant and jackass costume-wearers alike, are doing the same thing.  If that doesn't work, their insurance policy is vote "counting" in secret by computers.

Wed, 08/13/2014 - 22:08 | 5090441 AdvancingTime
AdvancingTime's picture

Those who look closely understand that it is not the 1% at the top stealing the icing off the cake, but the much smaller .1% or .01% that are skewing the numbers and overreaching.

I contend the biggest problem is the massive growth in crony capitalism and corruption in Washington. Much of this can be attributed to the ability of those in control "changing the rules" and positioning themselves to benefit at every corner. In our busy and complex world we have found it impossible to watch all the moving parts. More on this subject in the article below.

http://brucewilds.blogspot.com/2014/05/how-empires-collapse.html

Wed, 08/13/2014 - 22:11 | 5090450 AdvancingTime
AdvancingTime's picture

 In an investigation about two years ago 60 Minutes uncovered evidence of several instances of insider trading among prominent government officials. In a hurry then to save our public servants from embarrassment, President Barack Obama jumped on board. "Send me a bill that bans insider trading by members of Congress," the president declared in his 2012 State of the Union address. "I will sign it tomorrow."

The bill sailed through the Senate on a 96-3 vote, passed the House 417-2 and Obama promptly signed it, noting that its disclosure, and accountability requirements would apply to and demand transparency from virtually everyone in government who had access to inside financial information. Now this has been undone, my tip off was a April 27th 2013 Chicago Tribune editorial that reported Congress had voted to repeal part of the STOCK Act that recently became law. More on this subject in the article below.

http://brucewilds.blogspot.com/2013/04/washington-insider-trading-is-bac...

Wed, 08/13/2014 - 22:42 | 5090563 kchrisc
kchrisc's picture

"And the complete Banker's Decision Tree...

The REAL complete banksters'decision tree..."We own them all, so just do it.

An American, not US subject.

Do NOT follow this link or you will be banned from the site!