Smart. Sharp. Funny. Fearless.

Monday, December 09, 2019 {{ new Date().getDay() }}

Extortion by Peter SchweizerToday Weekend Reader brings you Extortion: How Politicians Extract Your Money, Buy Votes, and Line Their Own Pockets by conservative author Peter Schweizer. In addition to writing for Andrew Breitbart’s website, Schweizer was also the foreign policy adviser to Sarah Palin in 2011. He is currently the president of the Government Accountability Institute and research fellow at Stanford University’s Hoover Institution. 

In Extortion, Schweizer puts partisan politics aside and explains how both Democrats and Republicans at all levels of government have created a dynamic in Washington where legislation, votes, and committee assignments all come with a hefty price tag. A description of Extortion states, “Conventional wisdom holds that Washington is broken because outside special interests bribe politicians. The reverse is true: politicians have developed a new set of brass-knuckle legislative tactics designed to extort wealthy industries and donors into forking over big donations…” 

You can purchase the full book here.

There is one big difference between the Permanent Political Class and the Mafia. In the world of organized crime, the bosses are permanently in opposition to law enforcement. They might use bribery or extortion to control judges, witnesses, and the police, but they are always on the side of crime. If a member of a Mafia family decides to cooperate with law enforcement and become an informant, the Mafia will do anything and everything to kill him. You cross the lines at your mortal peril.

For the Permanent Political Class, by contrast, line-crossing is an art form. The name of the game is to make money and to extract it from the private sector, but you can do that from both sides of the public-private divide. You don’t have to be a member of Congress — you can be a lobbyist or a lawyer. Better yet, you can pass back and forth between political office and this private-public actor of Washington, always working to extract wealth from various industries that fear the laws and regulations you help create.

In 2010 Congress passed, and President Obama signed, the Dodd-Frank Wall Street Reform and Consumer Protection Act. It was allegedly designed to provide new safeguards for financial markets by further regulating investment banks and other financial market participants. The trouble? No one can actually understand it. As one banker, publicly supportive of the law, told The Economist , when asked about the “Volcker Rule,” a centerpiece of Dodd-Frank, the rule is “unintelligible any way you read it.” Sheila Bair, the former head of the Federal Deposit Insurance Corporation (FDIC), has called the Volcker Rule “extraordinarily complex” and says, “Regulators should think hard about starting over again with a simple rule.”

Buy From Amazon.com

But that won’t happen for one simple reason: Dodd-Frank was designed to be indecipherable by mere mortals. For the Permanent Political Class, the regulatory minefield creates a lucrative opportunity for extortion.

Part of the problem is the law’s massive size. At 2,319 pages, it is dramatically larger than previous financial reform laws and approaches the monstrous length of the Obamacare bill. By comparison, the Federal Reserve Act of 1913, which established the Federal Reserve banking system and the single national currency, was 31 pages long. The Glass-Steagall Banking Act of 1933, which overhauled the entire banking system in light of hundreds of bank failures, was 37 pages long.

Dodd-Frank is also remarkably complex. Even seemingly basic principles are expanded and twisted to make compliance with them nearly impossible. For example, the so-called Volcker Rule, which grew out of a three-page memo from former Fed chairman Paul Volcker to President Obama in 2009, morphed into a 298-page description with 383 questions that break down into 1,420 subquestions.

The cost of filling out the complex paperwork is enormous. The forms required by sections 404 and 406 of the law (which require the collection of systemic risk data from private funds, including hedge funds) will cost hedge funds approximately $100,000 to $150,000 to complete the first time, and then $40,000 a year after.

The law was written to create more rules. As Jonathan Macey of the Yale Law School puts it, “Laws classically provide people with rules. Dodd-Frank is not directed at people. It is an outline directed at bureaucrats and it instructs them to make still more regulations and to create more bureaucracies.” For example, the law requires 243 rules and sixty-seven studies by eleven different agencies. The law also requires the creation of multiple new government entities, including the Financial Stability Oversight Council (FSOC) and the Consumer Financial Protection Bureau (CFPB).

It’s not that government officials and bureaucrats can’t make things simple. At the height of the financial crisis in 2008, government officials produced a simple two-page application for banks to use in applying for federal Troubled Asset Relief Program (TARP) money. It was “the model of simplicity,” with only four clear, concise bullet points. Federal officials used this document to lend nearly $50 billion to the biggest banks. When a true crisis arises and time is precious, Washington can cut to the chase.

Government bureaucrats and law-writers can make things simple, but apart from dire emergencies, they generally choose not to. Complexity is a useful and lucrative method of legal extortion for politicians because, as University of London economist Anthony G. Heyes puts it, “it is precisely the complex, opacity and user-unfriendliness which underpin the value of their expertise.” And that translates into “selling advice to those they previously regulated.”

George LeMieux was appointed to the U.S. Senate to represent Florida in 2009 after Senator Mel Martinez stepped down. LeMieux jumped in quickly and saw immediately the complexity of a lot of bills. “Complexity always creates opportunities for those who know the details,” he told me. “I tried to read Dodd-Frank, and it was incomprehensible.”

Consider, for example, how lucrative the indecipherable Dodd-Frank law has become for the members of the Permanent Political Class who actually wrote it.

Buy From Amazon.com

Amy Friend was a chief aide to Senator Chris Dodd in crafting the Dodd-Frank financial reform bill and served as the chief counsel to the Senate Banking Committee. After the bill passed and became law, she left Capitol Hill and became a managing director at Promontory Financial Group, which describes itself as “a premier global financial services consulting firm.” This Washington-based consulting firm is headed up by many people like Friend — people who were once responsible for erecting or interpreting arcane financial regulations in public service and then joined the group, where they can charge high fees to help firms interpret and comply with these befuddling regulations. The firm is a “major power broker in Washington,” says the New York Times, “helping Wall Street navigate an onslaught of new rules and regulatory scrutiny” (many of those rules having been written, of course, by those now working at Promontory). Banks complain about Promontory’s high fees, which can run $1,500 an hour. Eugene Ludwig, the former comptroller of the currency under Bill Clinton, reportedly makes $30 million a year running Promontory. He lives in one of the most expensive houses in Washington, a 13,000-square-foot home on a three-acre estate.

When Ludwig announced that Amy Friend was joining his firm, he boasted about the fact that Friend had played a key role in shaping the Dodd-Frank bill and that at Promontory she would help clients with “the regulatory implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which, at 2,300 pages, is one of the most complex and wide-ranging overhauls of the financial regulatory framework in decades.”

But Friend was just one of many who crafted the convoluted bill, left government, and now command large fees from firms trying to make sense of it. Daniel Meade was the chief counsel on the Financial Services Committee under Chairman Barney Frank (the Frank of Dodd-Frank). Meade left Capitol Hill for Hogan Lovells, a well-established lobbying firm. When Meade arrived, the firm Hogan Lovells announced that Meade was “a principal draftsperson of substantial portions of the Dodd-Frank Wall Street Reform and Consumer Protection Act.” The firm’s publicity explained that Meade would be “representing financial services entities and other entities impacted by the regulation of those entities in connection with a broad range of regulatory and transactional matters, including issues related to the Dodd-Frank Act.” It makes all the sense in the world: if you can’t understand a complex new legal regime, who better to help guide you than one of the people who drafted it? But think about it from the perspective of the congressional aide: your future wealth depends on crafting a complex bill.

If you enjoyed this excerpt, you can purchase the full book here.

Excerpt from Extortion by Peter Schweizer. Copyright © 2013 by Peter Schweizer. Used by permission of Houghton Mifflin Harcourt Publishing Company. All rights reserved.

Reprinted with permission from Alternet

The Trump campaign focused its digital efforts on 3.5 million Black American voters in 2016, targeting them in an effort to deter them from voting.

A new report from the UK's Channel 4, which also helped expose how Cambridge Analytica precisely targeted voters for the Trump campaign during the 2016 election, makes the stunning revelation.

Keep reading... Show less